Help!!! I have to write a discussion to a fake company on whatbad debt expense to use. My fake customer business is a smallbusiness, so which one do I want them to use " The write off Methodor the Allowance Method? and why?
Help!!! I have to write a discussion to a fake company on whatbad debt expense to use. My fake customer business is a smallbusiness, so which one do I want them to use " The write off Methodor the Allowance Method? and why?
Related questions
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods
Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31:
| Customer | Amount | ||
| Kim Abel | $21,550 | ||
| Lee Drake | 33,925 | ||
| Jenny Green | 27,565 | ||
| Mike Lamb | 19,460 | ||
| Total | $102,500 | ||
The company prepared the following aging schedule for its accounts receivable on December 31:
| Aging Class (Number of Days Past Due) | Receivables Balance on December 31 | Estimated Percent of Uncollectible Accounts | |||
| 0-30 days | $715,000 | 1 | % | ||
| 31-60 days | 310,000 | 2 | |||
| 61-90 days | 102,000 | 15 | |||
| 91-120 days | 76,000 | 30 | |||
| More than 120 days | 97,000 | 60 | |||
| Total receivables | $1,300,000 | ||||
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 and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning credit balance of $95,000 on January 1 and the company uses the analysis of receivables method. 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 Seaforth International's net income have been under the allowance method than under the direct write-off method?
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