eBookPrint Item

Question Content Area

Entries for bad debt expense under the direct write$-$off and allowance methods

Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December $31$:

Customer Amount

Kim Abel $$24,400$

Lee Drake $32,300$

Jenny Green $29,800$

Mike Lamb $17,900$

Total $$104,400$

The company prepared the following aging schedule for its accounts receivable on December $31$:

Aging Class $($Number

of Days Past Due$)$ Receivables Balance

on December $31$ Estimated Percent of

Uncollectible Accounts

$0-30$ days $$730,0001\%$

$31-60$ days $280,0002$

$61-90$ days $110,00015$

$91-120$ days $75,00030$

More than $120$ days $94,00060$

Total receivables $$1,289,000$

Question Content Area

a$.$ Journalize the write$-$offs under the direct write$-$off method. If an amount box does not require an entry, leave it blank.

blankAccountDebitCredit

blank

Bad Debt Expense

$104,400$

Accounts Receivable$-$Kim Abel

$24,400$

Accounts Receivable$-$Lee Drake

$32,300$

Accounts Receivable$-$Jenny Green

$29,800$

Accounts Receivable$-$Mike Lamb

$17,900$

Feedback Area

Feedback

Under the direct write$-$off method, Bad Debt Expense is recorded when the customer's account is determined to be worthless and written$-$off. There is no adjusting entry at year$-$end to record estimated bad debt.

Question Content Area

b$.$ Journalize the write$-$offs and the year$-$end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $$90,100$ and the company uses the analysis of receivables method. If an amount box does not require an entry, leave it blank.

blankAccountDebitCredit

blank

Allowance for Doubtful Accounts

Accounts Receivable$-$Kim Abel

$24,400$

Accounts Receivable$-$Lee Drake

$32,300$

Accounts Receivable$-$Jenny Green

$29,800$

Accounts Receivable$-$Mike Lamb

$17,900$

blank

Bad Debt Expense

Allowance for Doubtful Accounts

Feedback Area

Feedback

Under the allowance method once a customer account is identified as uncollectible, it is written off against the allowance account.

Question Content Area

c$.$ How much higher $($lower$)$ would Seaforth International's net income have been under the allowance method than under the direct write$-$off method?

Lower

fill in the blank $1$ of $1$$

Feedback Area

Feedback

Compare the bad debt expense account balance for both methods.