Question

Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods

The following selected transactions were taken from the records of Shipway Company for the first year of its operations ending December 31:

Apr. 13. Wrote off account of Dean Sheppard, $8,450.

May 15. Received $500 as partial payment on the $7,100 account of Dan Pyle. Wrote off the remaining balance as uncollectible.

July 27. Received $8,450 from Dean Sheppard, whose account had been written off on April 13. Reinstated the account and recorded the cash receipt.

Dec. 31. Wrote off the following accounts as uncollectible (record as one journal entry):

Paul Chapman $2,225

Duane DeRosa 3,550

Teresa Galloway 4,770

Ernie Klatt 1,275

Marty Richey 1,690

31. If necessary, record the year-end adjusting entry for uncollectible accounts.

If no entry is required, select "No entry" and leave the amount boxes blank. For compound entries, if an amount box does not require an entry, leave it blank.

a. Journalize the transactions under the direct write-off method.

Apr. 13

May 15

July 27-reinstate

July 27-collection

Dec. 31-write-off

Dec. 31-adjusting

Answer 1

Journal entry under direct write off method
Date	General Journal	Debit	Credit
13-Apr	Bad debt expense	$8,450
	Accounts receivable - Dean Sheppard		$8,450
	(To record write off of accounts receivable)
15-May	Cash	$500
	Bad debt expense	$6,600
	Accounts receivable - Dan Pyle		$7,100
	(To record cash collection and write off)
27-Jul	Accounts receivable - Dean Sheppard	$8,450
	Bad debt expense		$8,450
	(To reinstate the accounts receivable which was written off earlier)
27-Jul	Cash	$8,450
	Accounts receivable - Dean Sheppard		$8,450
	(To record cash collected from customer)
31-Dec	Bad debt expense	$13,510
	Accounts receivable - Paul Chapman		$2,225
	Accounts receivable - Duane DeRosa		$3,550
	Accounts receivable - Teresa Galloway		$4,770
	Accounts receivable - Ernie Klatt		$1,275
	Accounts receivable - Marty Richey		$1,690
	(To record write off of accounts receivable)
31-Dec	No adjusting journal entry required
Company uses the direct write off method and so there is no allowance for doubtful account created and accounts receivable is directly written off to bad debt expense and so there would be no adjusting entry for bad debt expense