Question

At the beginning of 2021, Brad’s Heating & Air (BHA) has a balance of $24,600 in accounts receivable. Because BHA is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of 2021, BHA wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that BHA now will need to use the allowance method. The following transactions occur during 2021 and 2022. During 2021, install air conditioning systems on account, $176,000. During 2021, collect $171,000 from customers on account. At the end of 2021, estimate that uncollectible accounts total 10% of ending accounts receivable. In 2022, customers’ accounts totaling $6,600 are written off as uncollectible. Exercise 5-13A Part 2 2. Record each transaction using the direct write-off method. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Journal Entries under Direct write off method:

Year	Account title and Explanation	Debit	Credit
2021	Accounts receivable	$176,000
	Service revenue		$176,000
	[To record services performed on account]
	Cash	$171,000
	Accounts receivable		$171,000
	[To record collections from customers]
2022	Bad debt expense	$6,600
	Accounts receivable		$6,600
	[To record bad debt expense]