Question

Uncollectible Accounts, Using Direct Write-Off Method

Illustrate the effects on the accounts and financial statements of the following transactions in the accounts of Valley Care & Supplies Co., a local hospital supply company that uses the direct write-off method of accounting for uncollectible receivables:

If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

March 18. Received $20,250 on an account.

Statement of Cash Flows	Balance Sheet
	Assets			=	Liabilities	+	Stockholders' Equity
		+		=		+
Mar. 18.
Statement of Cash Flows								Income Statement

March 18. Wrote off the remaining $76,490 owed on account as uncollectible.

Statement of Cash Flows	Balance Sheet
	Assets			=	Liabilities	+	Stockholders' Equity
		+		=		+
Mar. 18.
Statement of Cash Flows								Income Statement

Aug. 29. Reinstated the account that had been written off on March 18. (Do not record the collection of cash yet.)

Statement of Cash Flows	Balance Sheet
	Assets			=	Liabilities	+	Stockholders' Equity
		+		=		+
Aug. 29.
Statement of Cash Flows								Income Statement

Aug. 29. Received $76,490 cash in full payment for the reinstated account.

Statement of Cash Flows	Balance Sheet
	Assets			=	Liabilities	+	Stockholders' Equity
		+		=		+
Aug. 29.
Statement of Cash Flows								Income Statement

Answer 1

	Assets				Liabilities		Stockholders' Equity		Statement of Cash flow		Income Statement
		+		=		+
18-Mar	Cash +$20,250		AR -$20,250						Operating: +$20,250		No Effect
18-Mar			AR -$76,490				RE -$76,490		No Effect		Allowance Bad Debt -$76,490
29-Aug			AR +$76,490				RE +$76,490		No Effect		Allowance Bad Debt +$76,490
29-Aug	Cash +$76,490		AR -$76,490						Operating: +$76,490		No Effect