Question

all together ; entries for bad debt expense and under the direct write off and allowance methods

UUTIW ALUWIPNC ACCT I BL. Cengage CengageNOWV2 Online teaching and Ch 9-3 Exercises & Problems Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount Kim Abel $21,550 33,925 Lee Drake Jenny Green Mike Lamb 27,565 19,460 $102,500 Total The company prepared the following aging schedule for its accounts receivable on December 31 Receivables Balance on December Estimated Percent of Uncollectible Accounts Aging Class (Number of Days Past Due) 31 0-30 days 31-60 days 61-90 days 91-120 days More than 120 days $715,000 310,000 102,000 76,000 97,000 < Previous Next >

Answer 1

Requirement a:

DIRECT WRITE OFF:

Account title and Explanation	Debit	Credit
Bad debt expense	$102,500
Accounts receivable-Kim Able		$21,550
Accounts receivable-Lee Drake		$33,925
Accounts receivable-Jenny Green		$27,565
Accounts receivable-Mike Lamb		$19,460
[To record write off of uncollectibles]

Requirement b:

	Account title and Explanation	Debit	Credit
Write-off	Allowance for doubtful account	$102,500
	Accounts receivable-Kim Able		$21,550
	Accounts receivable-Lee Drake		$33,925
	Accounts receivable-Jenny Green		$27,565
	Accounts receivable-Mike Lamb		$19,460
	[To record write off of uncollectibles]
Adj.	Bad debt expense	$14,650
	Allowance for doubtful account		$14,650
	[To record bad debt expense]

Calculations:

	0-30 days	31-60 days	61-90 days	91-120 days	More than 120 days	Total
Accounts receivable	$715,000	$310,000	$102,000	$76,000	$97,000
x % of uncollectible	1%	2%	15%	30%	60%
= Uncollectibles	$7,150	$6,200	$15,300	$22,800	$58,200	$109,650

Allowance for doubtful debts, Ending	$109,650
Allowance for doubtful debts, Beginning	($95,000)
Bad debt expense	$14,650

Requirement c:

$87,850 higher net income under allowance method than direct write off.

Explanation:

Bad debt expense under direct write off method	$102,500
Bad debt expense under allowance method	($14,650)
Difference in net income	$87,850

If bad debt expense is less then net income is high.