9.2
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31: June 8. Wrote off account of Kathy Quantel, $8,620. Aug. 14. Received $6,120 as partial payment on the $15,430 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible. Oct. 16. Received the $8,620 from Kathy Quantel, whose account had been written off on June 8. Reinstated the account and recorded the cash receipt. Dec. 31 Wrote off the following accounts as uncollectible (record as one journal entry): Wade Dolan $2,500 Greg Gagne 1,550 Amber Kisko 5,950 Shannon Poole 3,450 Niki Spence 950 Dec. 31 If necessary, record the year-end adjusting entry for uncollectible accounts. Rustic Tables Company prepared the following aging schedule for its accounts receivable: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0-30 days $414,000 2% 31-60 days 155,000 8 61-90 days 49,000 25 91-120 days 18,000 45 More than 120 days 25,000 90 Total receivables $661,000 For those amount boxes in which no entry is required, leave the box blank. If an account is not required, select "No entry" from the dropdown box(es). a. Journalize the transactions under the direct write-off method. June 8. Bad Debt Expense 8,440 x Accounts Receivable-Kathy Quantel 8,440 x Aug. 14 Cash Bad Debt Expense Accounts Receivable-Rosalie Oakes III I lll Oct.16-reinstate Accounts Receivable-Kathy Quantel Bad Debt Expense Oct.16-collection Cash Accounts Receivable-Kathy Quantel Dec. 31-write-off Bad Debt Expense Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne llllI. I 1 111111 Accounts Receivable-Amber Kisko Accounts Receivable-Shannon Poole Accounts Receivable-Niki Spence Dec. 31-adjusting No entry No entry b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning credit balance of $25,860 on January 1 and the company uses the analysis of receivables method. June 8. Allowance for Doubtful Accounts Accounts Receivable-Kathy Quantel Cash Aug. 14 Allowance for Doubtful Accounts Accounts Receivable-Rosalie Oakes Oct.16-reinstate Accounts Receivable-Kathy Quantel Allowance for Doubtful Accounts Cash Oct.16-collection I IIII I IIIII I 001 I 1v1100 Accounts Receivable-Kathy Quantel Dec. 31-write-off Allowance for Doubtful Accounts Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne Accounts Receivable-Amber Kisko Accounts Receivable-Shannon Poole Accounts Receivable-Niki Spence Dec. 31-adjusting Bad Debt Expense Allowance for Doubtful Accounts c. How much higher (lower) would Rustic Tables' net income have been under the direct write-off method than under the allowance method? Higher by
