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Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2016: Customer Amount Shawn Brooke

Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2016:

Customer Amount
Shawn Brooke $ 4,650
Eve Denton 5,180
Art Malloy 11,050
Cassie Yost 9,120
Total $30,000

Required:

A. On December 31, journalize the write-offs for 2016 under the direct write-off method. Refer to the Chart of Accounts for exact wording of account titles.
B. On December 31, journalize the write-offs for 2016 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during 2016. Based on past history and industry averages, % of credit sales are expected to be uncollectible. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
C. How much higher (lower) would Casebolt Companys 2016 net income have been under the direct write-off method than under the allowance method?

Chart of Accounts

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

Journal

A. On December 31, journalize the write-offs for 2016 under the direct write-off method. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

5

B. On December 31, journalize the write-offs for 2016 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during 2016. Based on past history and industry averages, % of credit sales are expected to be uncollectible. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

5

6

7

Final Question

C. How much higher (lower) would Casebolt Companys 2016 net income have been under the direct write-off method than under the allowance method?

by .

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