Entries for Bad Debt Expense Under the Direct Write-Off and
Allowance Methods
Seaforth International wrote off the following accounts
receivable as uncollectible for the year ending December
31:
| Customer |
Amount |
| Kim Abel |
$21,550 |
|
| Lee Drake |
33,925 |
|
| Jenny Green |
27,565 |
|
| Mike Lamb |
19,460 |
|
|
Total |
$102,500 |
|
The company prepared the following aging schedule for its
accounts receivable on December 31:
Aging Class (Number
of Days Past Due) |
Receivables Balance
on December 31 |
Estimated Percent of
Uncollectible Accounts |
| 0-30 days |
|
$715,000 |
|
1% |
|
| 31-60 days |
|
310,000 |
|
2 |
|
| 61-90 days |
|
102,000 |
|
15 |
|
| 91-120 days |
|
76,000 |
|
30 |
|
| More than 120 days |
|
97,000 |
|
60 |
|
| Total receivables |
|
$1,300,000 |
|
|
|
a. Journalize the write-offs under the direct
write-off method. If an amount box does not require an entry, leave
it blank.
b. Journalize the write-offs and the year-end
adjusting entry under the allowance method, assuming that the
allowance account had a beginning credit balance of $95,000 on
January 1 and the company uses the analysis of receivables method.
For a compound transaction, if an amount box does not require an
entry, leave it blank.
c. How much higher (lower) would Seaforth
International's net income have been under the allowance method
than under the direct write-off method?
$
