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

Customer Amount

Shawn Brooke $$4,636$

Eve Denton $5,196$

Art Malloy $11,001$

Cassie Yost $9,076$

Total $$29,909$

 

 

Required:

a$.$ On December $31,$ journalize the write$-$offs under the direct write$-$off method. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

b$.$ On December $31,$ journalize the write$-$offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $$5,016,000$ of credit sales during the year. Based on past history and industry averages, $0\mathrm{.}85\%$ of credit sales are expected to be uncollectible. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. If no entry is required, simply skip to the next transaction.

c$.$ How much higher $($lower$)$ would Casebolt Companys net income have been under the direct write$-$off method than under the allowance method?

CHART OF ACCOUNTS

Casebolt Company

General Ledger

ASSETS

$110$ Cash

$111$ Petty Cash

$121$ Accounts Receivable$-$Shawn Brooke

$122$ Accounts Receivable$-$Eve Denton

$123$ Accounts Receivable$-$Art Malloy

$124$ Accounts Receivable$-$Cassie Yost

$129$ Allowance for Doubtful Accounts

$131$ Interest Receivable

$132$ Notes Receivable

$141$ Merchandise Inventory

$145$ Office Supplies

$146$ Store Supplies

$151$ Prepaid Insurance

$181$ Land

$191$ Store Equipment

$192$ Accumulated Depreciation$-$Store Equipment

$193$ Office Equipment

$194$ Accumulated Depreciation$-$Office Equipment

LIABILITIES

$210$ Accounts Payable

$211$ Salaries Payable

$213$ Sales Tax Payable

$214$ Interest Payable

$215$ Notes Payable

EQUITY

$310$ Owner, Capital

$311$ Owner, Drawing

$312$ Income Summary

REVENUE

$410$ Sales

$610$ Interest Revenue

EXPENSES

$510$ Cost of Merchandise Sold

$520$ Sales Salaries Expense

$521$ Advertising Expense

$522$ Depreciation Expense$-$Store Equipment

$523$ Delivery Expense

$524$ Repairs Expense

$529$ Selling Expenses

$530$ Office Salaries Expense

$531$ Rent Expense

$532$ Depreciation Expense$-$Office Equipment

$533$ Insurance Expense

$534$ Office Supplies Expense

$535$ Store Supplies Expense

$536$ Credit Card Expense

$537$ Cash Short and Over

$538$ Bad Debt Expense

$539$ Miscellaneous Expense

$710$ Interest Expense

 

a$.$ On December $31,$ journalize the write$-$offs under the direct write$-$off method. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

b$.$ On December $31,$ journalize the write$-$offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $$5,016,000$ of credit sales during the year. Based on past history and industry averages, $0\mathrm{.}85\%$ of credit sales are expected to be uncollectible. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. If no entry is required, simply skip to the next transaction.

c$.$ How much higher $($lower$)$ would Casebolt Companys net income have been under the direct write$-$off method than under the allowance method?

by

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Answer rating: 100% (QA)

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