Page < 2 DIRECT WRITE-OFF METHOD FOR UNCOLLECTIBLE ACCOUNTS Review the completed example below. Under this method, accounts are written off and expensed at the time they are deemed uncollectible. 1) 2) 3) March: Raptor Inc. records a sale on account to Jefferson Co. of $10,000. July: After repeated attempts to collect, Raptor Inc. determines that the $10,000 receivable is uncollectible. Record the entry to write-off the balance. August: Out of the blue, Raptor receives a check from Jefferson Co. for $10,000 to pay off their old receivable. Accounts Receivable 10,000 (2) 10,000 (36) (1) 10,000 (3a) 10,000 Sales Revenue 10,000 (1) Cash (36) 10,000 Uncollectible Accounts Expense (2)10,000 10,000 (3a) ALLOWANCE METHOD FOR UNCOLLECTIBLE ACCOUNTS If you are using the Allowance Method (acceptable by GAAP), there are 2 ways to estimate uncollectible receivables and establish the Allowance for Uncollectible (Doubtful) Accounts balance. Use the t-accounts on the next page to complete the following problem. If you get stuck, there are many example problems online and in your text. EXERCISE ONE: ESTIMATE BASED ON SALES 1) June 30: A business records $750,000 in credit sales for the month of June. In the past, approximately 2% of all credit sales ultimately become uncollectible. Record the sales entry and the entry to establish the Allowance for Doubtful Accounts balance. 2) July 15: The company determines that an account balance from Susan Kendall in the amount of $3,000 is uncollectible. Record the entry to write-off the balance. 3) July 31: The same business recorded $600,000 in credit sales for the next month (July). Using the same 2% uncollectible rate, record the sales entry and the entry to add to the Allowance for Doubtful Accounts balance.