Under the allowance method of accounting for credit losses, theentry to write off a specific account: Select one: A. Will increasetotal assets B. Debits Bad Debts Expense and credits Allowance forUncollectible Accounts C. Is the same as the entry to write off aspecific account under the direct write-off method D. Does notaffect net income or total assets
Under the allowance method of accounting for credit losses, theentry to write off a specific account: Select one: A. Will increasetotal assets B. Debits Bad Debts Expense and credits Allowance forUncollectible Accounts C. Is the same as the entry to write off aspecific account under the direct write-off method D. Does notaffect net income or total assets
Unlock all answers
Related questions
Johnson Company uses the allowance method to account foruncollectible accounts receivable. Bad debt expense is establishedas a percentage of credit sales. For 2013, net credit sales totaled$6,000,000, and the estimated bad debt percentage is 1.50%. Theallowance for uncollectible accounts had a credit balance of$57,000 at the beginning of 2013 and $47,500, after adjustingentries, at the end of 2013.
| Required |
| What is bad debt expense for 2013?
|
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?
$
