Question

Quantum Solutions Company, a computer consulting firm, has decided to write off the $33,550 balance of an account owed by a customer, Alliance Inc.

On March 1, journalize the entry to record the write-off, assuming that (a) the direct write-off method is used and (b) the allowance method is used. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Quantum Solutions Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Alliance Inc.
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

(a) On March 1, journalize the entry to record the write-off, assuming that the direct write-off method is used. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

(b) On March 1, journalize the entry to record the write-off, assuming that the allowance method is used. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

Answer 1

a) Direct write-off method:
Accounting Equation:
	Date	Description	Post Ref.	Debit	Credit	Assets	Liabilities	Equity
1	31-Dec	Bad Debt Expense	538	amount		Increase Expense
2	31-Dec	Accounts Receivable-Alliance Inc.	121		amount	Reduce assets
b)Allowance method to write-off:
Accounting Equation:
	Date	Description	Post Ref.	Debit	Credit	Assets	Liabilities	Equity
1	31-Dec	Allowance for Doubtful Accounts	129	amount			Reduce
2	31-Dec	Accounts Receivable-Alliance Inc.	121		amount	Reduce