Complete all the requirements of M8-3, except assume that Extreme Fitness uses the direct write-off method. Note that this means Extreme does not have an Allowance for Doubtful Accounts balance. 

Data From M8-3.

At the end of 2016, Donnelly Fitness Centre has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2017, the company learns that certain customer accounts are not collectable, so management authorizes a write-off of these accounts totalling $5,000. 

a. Show how the company would have reported its receivable accounts on December 31, 2016. As of that date, what amount did Donnelly expect to collect? 

b. Prepare the journal entry to write off the accounts on January 2, 2017. 

c. Assuming no other transactions occurred between December 31, 2016, and January 3, 2017, show how Donnelly would have reported its receivable accounts on January 3, 2017. As of that date, what amount did Donnelly expect to collect? Has this changed from December 31, 2016? Explain why or why not.