Question

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

Customer	Amount
Shawn Brooke	$4,695
Eve Denton	5,157
Art Malloy	11,069
Cassie Yost	9,095
Total	$30,016

A.	Journalize the write-offs under the direct write-off method. Refer to the Chart of Accounts for exact wording of account titles.
B.	Journalize the write-offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,442,000 of credit sales during the year. Based on past history and industry averages, 0.75% of credit sales are expected to be uncollectible. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
C.	How much higher (lower) would Casebolt Company’s net income have been under the direct write-off method than under the allowance method?

Answer 1

a)	Bad debts expense			30,016
	account receivable-shawn Brooke				4,695
	account receivable-Eve Denton				5,157
	account receivable-Art Malloy				11,069
	account receivable-Cassie Yost				9,095
b)	Allowance for uncollectible accounts			30,016
	account receivable-shawn Brooke				4,695
	account receivable-Eve Denton				5,157
	account receivable-Art Malloy				11,069
	account receivable-Cassie Yost				9,095
Adjust	Bad debts expense			40815
	Allowance for uncollectible a/c's				40815
	(5,442,000*.75%)
c)	Higher by			10,799