EX 8-17 Entries for bad debt expense under the direct write-off and allowance methods
Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2014:
|
Customer |
Amount |
|
Shawn Brooke |
$ 4,650 |
|
Eve Denton |
5,180 |
|
Art Malloy |
11,050 |
|
Cassie Yost |
9,120 |
|
Total |
$30,000 |
a. Journalize the write-offs for 2014 under the direct write-off method.
b. Journalize the write-offs for 2014 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during 2014. Based on past history and industry averages, ¾% of credit sales are expected to be uncollectible.
c. How much higher (lower) would Casebolt Company’s 2014 net income have been under the direct write-off method than under the allowance method?