Question
The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31: June 8.Wrote off account of Kathy
The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31:
June 8.Wrote off account of Kathy Quantel, $8,440.Aug. 14.Received $3,000 as partial payment on the $12,500 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.Oct. 16.Received the $8,440 from Kathy Quantel, whose account had been written off on June 8. Reinstated the account and recorded the cash receipt.Dec. 31Wrote off the following accounts as uncollectible (record as one journal entry): Wade Dolan $4,600 Greg Gagne 3,600 Amber Kisko 7,150 Shannon Poole 2,975 Niki Spence 6,630 Dec. 31.If necessary, record the year-end adjusting entry for uncollectible accounts.
Journalize the transactions under the allowance method, assuming that the allowance account had a beginning credit balance of $36,000 on January 1 and the company uses the analysis ofreceivablesmethod. Rustic Tables Company prepared the following aging schedule for itsaccounts receivable:
Aging Class (Number
of Days Past Due)Receivables Balance
on December 31Estimated Percent of
Uncollectible Accounts0-30 days$320,000 1% 31-60 days 110,000361-90 days 24,0001091-120 days 18,00033More than 120 days 43,00075
Total receivables $515,000
How much higher (lower) would Rustic Tables' net income have been under the direct write-off method than under the allowance method?
HigherBy?
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