Question

Entries for bad debt expense under the direct write off and allowance methods Dato Accounts Journal Final Question Instructions The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31, 2016 June Aug Oer Dec. 8. Wrote off account of Kathy Quantel 58,440. Received $1,000 as partial payment on the 512 500 account of Rosalie Oakes remaining balance as uncollectible Received the 56.440 from Kathy Quantel whose account had be Reinstated the account and recorded the cash receipt Wrote off the following accounts as uncollectible records Wade Dolan Greg Gagne Amber Kisko Shannon Poole Nie Spence 31. If necessary, record the year-end adjusting entry for uncollectible accounts Rustie Tables Company prepared the following aging schedule for its h a n December 31 Ested Percent of Unconecte Accounts

Answer 1

Debit Credit 64 65 66 Date Account title & explanation 8-Jun Bad Debts Expense Accounts Receivable-Kathy Quantel 8440 8440 67 68 14-Aug Cash Bad Debts expense Accounts Receivable-Rosalie Oakes 3000 9500 12500 8440 16-Oct Accounts Receivable-Kathy Quantel Bad Debts expense 8440 74 16-Jan Cash 8440 Accounts Receivable-Kathy Quantel 8440 24955 78 79 31-Dec Bad Debts expense Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne Accounts Receivable-Amber Kisko Accounts Receivable-Shannon Poole Accounts Receivable-Niki Spence 4600 3600 7150 2975 6630 83 84

86 B. Journalize the transactions for 2016 under the allowance method, assuming that the allowance account had a beginning balance of $36,000 on Debit Credit 89 Date Account title & explanation 8-Jun Allowance for Doubtful Accounts Accounts Receivable-Kathy Quantel 8440 90 8440 14-Aug Cash Allowance for Doubtful Accounts Accounts Receivable-Rosalie Oakes 3000 9500 93 12500 94 95 8440 16-Oct Accounts Receivable-Kathy Quantel Allowance for Doubtful Accounts 97 8440 8440 16-Jan Cash Accounts Receivable-Kathy Quantel 8440 99 100 101 102 24955 104 31-Dec Allowance for Doubtful Accounts Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne Accounts Receivable-Amber Kisko Accounts Receivable-Shannon Poole Accounts Receivable-Niki Spence 105 4600 3600 7150 2975 6630 106

45545 109 110 111 112 31-Dec Bad Debts expense (47090 -1545) Allowance for Doubtful Accounts (36000-8440-9500+8440-24955)=1545 45545 113 114 Age 115 116 117 118 Aging Schedule - Estimated Uncollectible Amounts Amount of Receivables Estimated Uncollectible Percentage 320000 1% 110000 3% 24000 10% 18000 33% 43000 75% 515000 0-30 days past due 31-60 days past due 61-90 days past due 91-120 days Past due More than 120 days past due Total Estimated Amount Uncollectible 3200 3300 2400 5940 32250 47090 119 120 121 122 123 C. How much higher (lower) would Rustic Tables' 2016 net income have been under the direct write-off method than under the allowance method? 124 125 Bad Debts expense under; Allowance method 45545 Direct Write off method 34455 128 Difference 11090 129 130 131 Rustic Tables' Income would be $11,090 higher under the direct write off method than under the allowance method.