) The ledger of Ruru Company at the end of the current year shows Accounts

Receivable $200,000, Sales $1,400,000, and Sales Returns and Allowances

$50,000.

Instructions:

(a)

If Ruru uses the direct write-off method to account for uncollectible accounts,

journalize the adjusting entry at December 31, assuming Ruru determines

that Barking Ghosts Company's $2,400 balance is uncollectible.

(b)

If Allowance for Doubtful Accounts has a credit balance of $3,500 in the trial

balance, journalize the adjusting entry at December 31, assuming bad debts

are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.

(c)

If Allowance for Doubtful Accounts has a debit balance of $370 in the trial

balance, journalize the adjusting entry at December 31, assuming bad debts

are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.

(d)

Why is the allowance method required by GAAP?