Required:

• Solve for the unknowns in the preceding schedule. (Hint: Use T-accounts.)
• Make all entries related to the Allowance for credit losses account for 20X020X2.
• Make all entries for bad debts for 20X020X2 assuming that Garrels did not accrue for estimated bad debt losses but instead recorded its bad debt provisions once receivables were determined to be uncollectible. (This is called the direct write-off method.)
• Why does GAAP require the allowance method over the direct write-off method?
• Calculate the cumulative difference in reported pre-tax income under the allowance and direct write-off methods over the 20X020X2 period.