At 31 December 2016, the trial balance of ABC Ltd contained the following amounts before adjustment:

Debits Credits

Accounts Receivable $400 000

Allowance for Doubtful Debts $5 200

Sales $950 000

Required:

(1) Based on the information given which method of accounting for bad debts is ABC Ltd usingthe direct write-off method or the allowance method, and why?

(2) Prepare the adjusting entry at 31 December 2016 for bad debts expense assuming that the ageing schedule indicates that $10 500 of accounts receivable will be uncollectable.

(3) Repeat (2) assuming that instead of a credit balance, there is a $1000 debit balance in the Allowance for Doubtful Debts before the adjusting entry.

(4) During the next month, January 2017, a $2 000 account receivable is written off as uncollectable. Prepare the journal entry to record the write-off.