Question

E8-17 Journalizing transactions using the direct write-off method On June 1, 2018, Best Performance Cell Phones sold $21,000 of merchandise to Anthony Trucking Company on account. Anthony fell on hard times and on July 15 paid only $5,000 of the account receivable. After repeated attempts to collect, Best Performance finally wrote off its accounts receivable from Anthony on September 5. Six months later, March 5, 2019, Best Performance received Anthony's check for $16,000 with a note apologizing for the late payment. Requirements 1. Journalize the transactions for Best Performance Cell Phones using the direct write-off method. Ignore Cost of Goods Sold. 2. What are some limitations that Best Performance will encounter when using the direct write-off method?

Answer 1

1	Date	Account Titles and Explanation	Debit	Credit
	June 01	Accounts Receivable-Anthony Trucking Co.	$21,000
		Sales Revenue		$21,000
		(To record Sold goods on account.)
	July 15	Cash	$5,000
		Accounts Receivable-Anthony Trucking Co.		$5,000
		(To record collected cash on account)
	Sep 05	Bad Debts Expense	$16,000
		Accounts Receivable-Anthony Trucking Co.		$16,000
		(To record Wrote off uncollectible accounts.)
	Mar 05	Accounts Receivable-Anthony Trucking Co.	$16,000
		Bad Debts Expense		$16,000
		(To record reinstated previously written off account)
	Mar 05	Cash	$16,000
		Accounts Receivable-Anthony Trucking Co.		$16,000
		(To record collected cash on account)
2	Best Performance will encounter some limitations when using the direct write-off
	method which are Violates Matching Principle, Overstates Accounts Receivable,
	Inaccurate Profits etc.