Becker Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2008:
|
Customer |
Amount |
|
Skip Simon |
$20,000 |
|
Clarence Watson |
13,500 |
|
Bill Jacks |
7,300 |
|
Matt Putnam |
4,200 |
|
Total |
$45,000 |
a. Journalize the write offs for 2008 under the direct write off method.
b. Journalize the write offs for 2008 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $2,000,000 of credit sales during 2008. Based on past history and industry averages, 3% of credit sales are expected to be uncollectible.
c. How much higher (lower) would Becker Company’s 2008 net income have been under the direct write off method than under the allowance method?