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Posner Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2010:
Customer
Amount
J. Jackson
$10,000
L. Stanton
9,500
C. Barton
13,100
S. Fenton
2,400
Total
$35,000
Required:
(1)
Journalize the write offs for 2010 under the direct write off method.
(2)
Journalize the write offs for 2010 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $2,400,000 of credit sales during 2010. Based on past history and industry average, 1.50% of credit sales are expected to be uncollectible.
(3)
How much higher or lower would Posner Company’s 2010 net income have been under the direct write off method than under the allowance method?
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