Problem #5: Direct write-off method versus Allowance Method JEs

Given the following information, answer the questions below.

Total credit sales

$564,550

Accounts Receivable 12/31

$125,600

1. What is Bad Debt Expense JE under the direct write-off method? Assume Bad Debt Expense is $23,100.

2. If the company uses allowance method, what is the JE to record Bad Debt Expense? Assume uncollectibles are estimated to be 3% of AR and that AFDA has a debit balance of $2,320.

3. If the company uses allowance method, what is the JE to record Bad Debt Expense? Assume uncollectibles are estimated to be 3% of AR and that AFDA has a credit balance of $1,275.