Roll the allowance through writeoffs and recoveries

The ending expected loss is $10,500. It is not automatically the period's expense. Linden Peak begins with a $9,000 allowance, writes off $20,000, and records $1,000 of recoveries under the stipulated allowance convention.

Close both rollforwards

Opening gross receivables       $300,000
+ credit sales                   900,000
− cash collections             (850,000)
− writeoffs                     (20,000)
= ending gross receivables       330,000

Opening allowance                 $9,000
+ credit-loss expense             20,500
− writeoffs                     (20,000)
+ recoveries                       1,000
= ending allowance                10,500

Ending net receivables = $330,000 − $10,500 = $319,500

The writeoff debits the allowance and credits the gross receivable. It does not ordinarily create another loss at that date. A recovery is not new revenue; tie it to the prior customer and writeoff and follow the controlled reinstatement or allowance convention.

Prepare the close entry

The estimate-adjustment entry debits Credit-loss expense $20,500 and credits Allowance for credit losses $20,500 under the supplied facts. Keep that entry separate from the writeoff and recovery entries. Reconcile the ledger, aging, model, statement, note, and tax-basis boundary after posting.

Rollforward challenge

Reperform the checked example, then hold the ending allowance at $10,500 while changing writeoffs to $15,000. Compute the revised expense and explain why the net ending presentation can stay unchanged even though period activity moves.