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		$21,550
Lee Drake		33,925
Jenny Green		27,565
Mike Lamb		19,460
	Total	$102,500

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		$715,000		1%
31-60 days		310,000		2
61-90 days		102,000		15
91-120 days		76,000		30
More than 120 days		97,000		60
Total receivables		$1,300,000

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

b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning credit balance of $95,000 on January 1 and the company uses the analysis of receivables method. For a compound transaction, if an amount box does not require an entry, leave it blank.

Write-off
Adjustment

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