At December 31, 2012, the trial balance of Seidl Company contained the following amounts before adjustment.
|
Debits |
Credits |
|
|
Accounts Receivable |
$500,000 |
|
|
Allowance for Doubtful Accounts |
$ 4,800 |
|
|
Sales Revenue |
2,400,000 |
Instructions
(a) Based on the information given, which method of accounting for bad debts is Seidl Company using—the direct write-off method or the allowance method? How can you tell?
(b) Prepare the adjusting entry at December 31, 2012, for bad debts expense assuming that the aging schedule indicates that $26,000 of accounts receivable will be uncollectible.
(c) Repeat part (b), assuming that instead of a credit balance there is a $4,800 debit balance in the Allowance for Doubtful Accounts.
(d) During the next month, January 2013, a $5,000 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.
(e) Repeat part (d), assuming that Seidl uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.
(f ) What type of account is the allowance for doubtful accounts? How does it affect how accounts receivable is reported on the balance sheet at the end of the accounting period?