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, $3,150.
Aug. 14.	Received $2,240 as partial payment on the $5,640 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.
Oct. 16.	Received the $3,150 from Kathy Quantel, which 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	$910
Greg Gagne	570
Amber Kisko	2,170
Shannon Poole	1,260
Niki Spence	350

Dec. 31 If necessary, record the year-end adjusting entry for the uncollectible accounts. The company prepared the following aging schedule for its accounts receivable:

Aging Class (Number of Days Past Due)									Receivables Balance on December 31				Estimated Percent of Uncollectible Accounts
								0-30 days	$151,000				1	%
								31-60 days	57,000				7
								61-90 days	18,000				20
								91-120 days	7,000				45
								More than 120 days	9,000				80
								Total receivables	$242,000

For those amount boxes in which no entry is required, leave the box blank. If an account is not required, select "No entry" from the dropdown box(es).

A. Journalize the transactions

June 8

Aug 14

Oct 16 -Reinstate

Oct. 16-collection

Dec. 31-write-off

b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $9,450 at the beginning of the year and the company uses the analysis of receivables method.

June 8

Aug. 14

Oct. 16 Reinstate

Oct 16 Collection

Dec 31 Write off

Dec 31 adjusting

c. How much higher (lower) would Rustic Tables net income have been under the direct write-off method than under the allowance method?