1. (Allowance Method) Respond to these prompts related to accounting for bad debt.

1. How is the allowance method for accounting for bad debt different from the direct write-off method? When is bad debt expense recorded under each method? Which one, if either, is required by GAAP?
2. ABC Company uses the balance sheet approach to estimate bad debt expense. It started 2021 with a credit balance of $100,000 in its allowance for uncollectible accounts. ABC wrote off $20,000 of bad debts during 2021 and its aging of accounts receivable at 12/31/21 indicates it should have a credit balance of $65,000 in the allowance for uncollectible accounts. No other journal entries to the allowance have been made. Provide ABCs journal entry to record bad debt expense. Show your work for partial credit.