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, $5,090.

Aug. 14.

Received $3,610 as partial payment on the $9,110 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.

Oct. 16.

Received the $5,090 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	$1,480
Greg Gagne	920
Amber Kisko	3,510
Shannon Poole	2,040
Niki Spence	560

Dec. 31.

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

Question Content Area

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.

June 8	Accounts Payable-Kathy QuantelAccounts Receivable-Kathy QuantelAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
	Accounts Payable-Kathy QuantelAccounts Receivable-Kathy QuantelAllowance for Doubtful AccountsBad Debt ExpenseNo entrySales	- Select -	- Select -
Aug. 14	Accounts Payable-Rosalie OakesAccounts Receivable-Rosalie OakesAllowance for Doubtful AccountsCashNo entrySales	- Select -	- Select -
	Accounts Payable-Rosalie OakesAccounts Receivable-Rosalie OakesAllowance for Doubtful AccountsBad Debt ExpenseInterest RevenueNo entry	- Select -	- Select -
	Accounts Payable-Rosalie OakesAccounts Receivable-Rosalie OakesAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
Oct. 16	Accounts Payable-Kathy QuantelAccounts Receivable-Kathy QuantelAllowance for Doubtful AccountsBad Debt ExpenseInterest RevenueNo entry	- Select -	- Select -
	Accounts Payable-Kathy QuantelAdvertising ExpenseAllowance for Doubtful AccountsBad Debt ExpenseDividendsNo entry	- Select -	- Select -
Oct. 16	Accounts Payable-Kathy QuantelAdvertising ExpenseAllowance for Doubtful AccountsCashDividendsNo entry	- Select -	- Select -
	Advertising ExpenseAccounts Receivable-Kathy QuantelAllowance for Doubtful AccountsCashDividendsNo entry	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Wade DolanAccounts Receivable-Wade DolanAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Greg GagneAccounts Receivable-Greg GagneAllowance for Doubtful AccountsBad Debt ExpenseInterest RevenueNo entry	- Select -	- Select -
	Accounts Payable-Amber KiskoAccounts Receivable-Amber KiskoAllowance for Doubtful AccountsCashInterest RevenueNo entry	- Select -	- Select -
	Accounts Payable-Shannon PooleAccounts Receivable-Shannon PooleAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
	Accounts Payable-Niki SpenceAccounts Receivable-Niki SpenceAllowance for Doubtful AccountsCashInterest RevenueNo entry	- Select -	- Select -
Dec. 31	Allowance for Doubtful AccountsBad Debt ExpenseCashIncome SummaryNo entrySales	- Select -	- Select -
	Allowance for Doubtful AccountsBad Debt ExpenseCashIncome SummaryNo entrySales	- Select -	- Select -

Question Content Area

b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $15,270 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)									Receivables Balance on December 31				Estimated Percent of Uncollectible Accounts
								0-30 days	$244,000				3	%
								31-60 days	92,000				8
								61-90 days	29,000				20
								91-120 days	11,000				50
								More than 120 days	15,000				80
								Total receivables	$391,000

June 8	Accounts Payable-Kathy QuantelAccounts Receivable-Kathy QuantelAllowance for Doubtful AccountsCashNo entryNotes Receivable	- Select -	- Select -
	Accounts Payable-Kathy QuantelAccounts Receivable-Kathy QuantelAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
Aug. 14	Accounts Payable-Rosalie OakesAccounts Receivable-Rosalie OakesBad Debt ExpenseCashNo entrySales	- Select -	- Select -
	Accounts Payable-Rosalie OakesAccounts Receivable-Rosalie OakesAllowance for Doubtful AccountsBad Debt ExpenseNo entryNotes Receivable	- Select -	- Select -
	Accounts Payable-Rosalie OakesAccounts Receivable-Rosalie OakesAllowance for Doubtful AccountsBad Debt ExpenseCashNo entry	- Select -	- Select -
Oct. 16	Accounts Receivable-Kathy QuantelAdvertising ExpenseBad Debt ExpenseDividendsNo entrySales	- Select -	- Select -
	Accounts Payable-Kathy QuantelAdvertising ExpenseAllowance for Doubtful AccountsBad Debt ExpenseInterest RevenueNo entry	- Select -	- Select -
Oct. 16	Accounts Payable-Kathy QuantelAdvertising ExpenseBad Debt ExpenseCashDividendsNo entry	- Select -	- Select -
	Advertising ExpenseAccounts Receivable-Kathy QuantelBad Debt ExpenseCashDividendsNo entry	- Select -	- Select -
Dec. 31	Accounts ReceivableAllowance for Doubtful AccountsCashDividendsNo entryNotes Receivable	- Select -	- Select -
	Accounts Payable-Wade DolanAccounts Receivable-Wade DolanAdvertising ExpenseDividendsInterest RevenueNo entry	- Select -	- Select -
	Accounts Payable-Greg GagneAccounts Receivable-Greg GagneAdvertising ExpenseDividendsNo entrySales	- Select -	- Select -
	Accounts Payable-Amber KiskoAccounts Receivable-Amber KiskoAdvertising ExpenseCashDividendsNo entry	- Select -	- Select -
	Accounts Payable-Shannon PooleAccounts Receivable-Shannon PooleAdvertising ExpenseDividendsInterest RevenueNo entry	- Select -	- Select -
	Accounts Payable-Niki SpenceAccounts Receivable-Niki SpenceAdvertising ExpenseCashDividendsNo entry	- Select -	- Select -
Dec. 31	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseIncome SummaryNo entry	- Select -	- Select -
	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseIncome SummaryNo entry	- Select -	- Select -

Question Content Area

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

HigherLower