Part A.

Quantum Solutions Company, a computer consulting firm, has decided to write off the $33,550 balance of an account owed by a customer, Alliance Inc.

Required:

On March 1, journalize the entry to record the write-off, assuming that (a) the direct write-off method is used and (b) the allowance method is used. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Quantum Solutions Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Alliance Inc.
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

Part B.

Providing for Doubtful Accounts

At the end of the current year, the accounts receivable account has a debit balance of $1,021,000 and sales for the year total $11,580,000.

1. The allowance account before adjustment has a credit balance of $13,800. Bad debt expense is estimated at 3/4 of 1% of sales.
2. The allowance account before adjustment has a credit balance of $13,800. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $44,200.
3. The allowance account before adjustment has a debit balance of $9,200. Bad debt expense is estimated at 1/2 of 1% of sales.
4. The allowance account before adjustment has a debit balance of $9,200. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $76,400.

Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

a.	$
b.	$
c.	$
d.	$

Part C.

Estimating Doubtful Accounts

Performance Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31 and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:

Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31.

Performance Bike Co.
Estimation of Uncollectible Accounts
December 31
Age Interval	Balance	Estimated Uncollectible Accounts Percent	Estimated Uncollectible Accounts Amount
Not past due	$472,000	1/2%	$
1-30 days past due	51,900	2
31-60 days past due	23,600	8
61-90 days past due	17,000	18
91-180 days past due	12,300	42
Over 180 days past due	9,000	75
Total	$585,800		$

Part D.

Effect of Doubtful Accounts on Net Income

During its first year of operations, Macks Plumbing Supply Co. had sales of $640,000, wrote off $10,200 of accounts as uncollectible using the direct write-off method, and reported net income of $70,400. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1 3/4% of sales would be uncollectible. $