Question

Entries for Bad Debt Expense under the Direct Write-Off and Allowance Method Casebolt Company wrote off...

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

Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31:

Customer Amount
Shawn Brooke $11,700
Eve Denton 10,900
Art Malloy 15,100
Cassie Yost 2,800
Total 40,500

a. Journalize the write-offs for under the direct write-off method. If an amount box does not require an entry, leave it blank.

b. Journalize the write-offs for under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $3,920,000 of credit sales during the year. Based on past history and industry averages, 1 1/4% of credit sales are expected to be uncollectible. For a compound transaction, if an amount box does not require an entry, leave it blank.

Write-off
Adjustment

c. How much higher (lower) would Casebolt Company's net income have been under the direct write-off method than under the allowance method?
by $

Homework Answers

Answer #1
Date Account titles & Explanations Debit Credit
a) Bad debts expens 40,500
Accounts receivable - Shawn 11,700
Accounts receivable -Eve Denton 10,900
Accounts receivable-Art Malloy 15,100
Accounts receivable-Cassie Yost 2,800
b) Allowance for uncollectible accounts 40,500
Accounts receivable - Shawn 11,700
Accounts receivable -Eve Denton 10,900
Accounts receivable-Art Malloy 15,100
Accounts receivable-Cassie Yost 2,800
Bad debts expense 49000
Allowance for uncollectible accounts 49,000
(3,920,000*1 1/4 %)
c) net income will be higher under direct write off method by $8,500 (49000-40500)
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