Entres Tor bad Debt Expense Under the Direct write-Off and Allowance Method

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, $4,600.

Aug. 14. Received $3,270 as partial payment on the $8,230 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.

Oct. 16. Received the $4,600 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

$1,330

Greg Gagne

830

Amber Kisko

3,170

Shannon Poole

1,840

Niki Spence

510

Dec. 31. If necessary, record the year-end adjusting entry for uncollectible accounts.

If no entry is required, select "No entry" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $13,800 at the beginning of the year and the company uses the analysis of

receivables method. Rustic Tables Company prepared the following aging schedule for its accounts

receivable:

c. How much higher (lower) would Rustic Tables' met income have been under the direct write-off method

than under the allowance method?

ANSWER B AND C

Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Method 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, $4,600. Aug. 14. Received $3,270 as partial payment on the $8,230 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible. Oct. 16. Received the $4,600 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 $1,330 830 Greg Gagne Amber Kisko 3,170 Shannon Poole 1,840 Niki Spence 510 Dec. 31. If necessary, record the year end adjusting entry for uncollectible accounts. If no entry is required, select "No entry and leave the amount boxes blank. If an amount box does not require an entry, leave it blank. a. Journalize the transactions under the direct write-off method. 0 4.600 June 8 Bad Debt Expense D Accounts Receivable-Kathy Quantel 4.600 3.270 Aug. 14 Cash 1960 Bad Debt Expense 3.230 Accounts Receivable Rosalie Oakes 4.600 0 Oct. 16 Accounts Receivable Kathy Quantel 4.600 Bad Debt Expense 4.600 0 Oct. 16 Cash Accounts Receivable Kathy Quantel 0 4.600 7,630 0 Dec 31 Bad Debt Expense HA 1,840 Shannon Poole 510 Niki Spence Dec. 31. If necessary, record the year end adjusting entry for uncollectible accounts. If no entry is required, select "No entry" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank, a. Journalize the transactions under the direct write-off method. 4.600 0 June 8 Bad Debt Expense Accounts Receivable Kathy Quantel 0 4,600 0 3,270 Aug. 14 Cash 0 4,960 Bad Debt Expense 0 8,230 Accounts Receivable Rosalie Oakes 0 4.600 Oct. 16 Accounts Receivable Kathy Quantel Bad Debt Expense 0 4,600 0 4,600 Oct. 16 Cash 0 4,600 Accounts Receivable Kathy Quantel 7.680 0 Dec 31 Bad Debt Expense 0 1,330 Accounts Receivable-Wade Dolan 0 830 Accounts Receivable-Greg Gagne O 3,170 Accounts Receivable Amber Kisko O 1,840 Accounts Receivable Shannon Poole Accounts Receivable-Niki Spence 0 510 0 Dec. 31 No entry 0 0 No entry b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $13.800 at the beginning of the year and the company uses the analysis of receivables method. Rustic Tables Company prepared the following aging schedule for its accounts receivable: Aging Class (Number of Days Past Due) 0-30 days 31-60 days 61-90 days Receivables Balance on December 31 $221,000 Estimated Per Uncollectible 2.96 83,000 26,000 10,000 30 55 91-120 days More than 120 days Total receivables 13,000 75 $353,000 4.600 June 5 Allowance for Doubtful Accounts Accounts Receivable Kathy Quantel 0 4.600 Aug. 14 Cash 3.2707 4.960 o 3.30! Allowance for Doubtful Accounts Accounts Receivable-Rosalie Oakes Oct. 16 Accounts Receivable-Kathy Quantel Allowance for Doubtful Accounts 4.600 O 4.600 4.600 Oct. 16 Cash Accounts Receivable Kathy Quantel O 4.600 7.680 ol PE 0 1330 o 830 Dec 31 Allowance for Doubtful Accounts Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne Accounts Receivable-Amber Kisko Accounts Receivable Shannon Poole Accounts Receivable-Niki Spence 0 3.170 130 o 516 Dec. 21 Bad Debt Expense Allowance for Doubtful Accounts 88 O! X Faedo How much higher (lower) would Rustic Tables' net income have been under the direct write-off method than under the allowance method Higher by