Question

00000 Chapter 8 Homework Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Commu Casebolt Company wrote off the follo accounts receivable as uncollectible for the first year of its operations ending December 31: Customer Amount Shawn Brooke $4,650 Eve Denton 5,180 Art Malloy 11,050 Cassie Yost 9,120 Total $30,000 a. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank. Accounts Receivable x Accounts Receivable-Shawn Brooke Accounts Receivable-Eve Denton Accounts Receivable-Art Mallloy Accounts Receivable-Cassie Yost Feedback Y Check My Work Under the direct write-off method, Bad Debt Expense is recorded when the customer's account is determined to be worthless and written-off. There is no adjusting entry at year-end to record estimated bad debt. To compute net income using the allowance method, first compute net income before write-off of accounts associated with the bad debt expense. b. Journalize the write-offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during the year. Based on past history and industry averages, 3/4% of credit sales are expected to be

Answer 1

a) Journal under Direct write off method

Date	Account tittle	Debit	Credit
	Bad Debt Expense
	Account Receivable-Shawn Brooke
	Account Receivable-Ave Denton
	Account Receivable-Art Malloy
	Account Receivable-Kassie Yost

b) Journal under Allowance method

Date	Account tittle	Debit	Credit
	Bad Debt Expense	39,375
	Allowance for Doubtful Accounts		39,375
	Estimated Bad Debt Expense 0.75% of Sales

c) Under Direct Method, Net income would be 39,375 higher than Net Income under Allowance method. The reason that under direct method no bad debt has arisen but under allowance method estimated bad debt expense will reduce net income by $39,375.

d) Journal for Notes Receivable

Date	Account tittle	Debit	Credit
12/07/17	Note Receivable-UCB & Co	60,000
	Allowance for Doubtful Accounts		60,000
	To record 60,000, 3% Note Receivable
12/31/17	Interest Receivable	120
	Interest Revenue		120
	Accrued interest recorded (60,000 x 0.03 x 24/360)
12/31/17	Interest Revenue	120
	Income Summary		120
	To record closing entry
02/05/18	Cash	60,300
	Note Receivable		60,000
	Interest Receivable		120
	Interest Revenue		180
	Being Cash received from N/R, Int./R & Int.Revenue
	Int. for 36 days = (60,000 x 0.03 x 36/360) =180

e) Journal for Notes Receivable

2017, Dec. 7 Note Receivable 75,000

Account Receivable- UCB & Co. 75,000

To record 75,000, 3% Note Receivable

Dec. 31 Interest Receivable 150

Interest Revenue 150

To record Accrued interest for Dec. for 24 days

Dec. 31 Interest Revenue 150

Income Summary 150

To record Closing entry for Int. revenue

2018, Feb.5 Cash 75,375

Account Receivable-- UCB & Co. 75,000

Interest Receivable 150

Interest Revenue 225

To record receipt of cash from N/R, I/R & Int. revenue