Exercise 5-13A Compare the allowance method and the direct write-off method (LO5-6)

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At the beginning of 2021, Brads Heating & Air (BHA) has a balance of $24,100 in accounts receivable. Because BHA is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of 2021, BHA wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that BHA now will need to use the allowance method. The following transactions occur during 2021 and 2022.

1. During 2021, install air conditioning systems on account, $171,000.

2. During 2021, collect $166,000 from customers on account.

3. At the end of 2021, estimate that uncollectible accounts total 15% of ending accounts receivable.

4. In 2022, customers accounts totaling $6,100 are written off as uncollectible.

Exercise 5-13A Part 1

Required:

1. Record each transaction using the allowance method. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Journal entry worksheet During 2021, install air conditioning systems on account, $171,000. Note: Enter debits before credits. General Journal Debit Credit Transaction 1 Record entry Clear entry View general journal Journal entry worksheet During 2021, collect $166,000 from customers on account. Note: Enter debits before credits. General Journal Debit Credit Transaction 2 Record entry Clear entry View general journal Journal entry worksheet At the end of 2021, estimate that uncollectible accounts total 15% of ending accounts receivable. Note: Enter debits before credits. General Journal Debit Credit Transaction 3 Record entry Clear entry View general journal Journal entry worksheet