Entries for bad debt expense under the direct write-off and allowance methods
cybacatxEX 9-14 Entries for bad debt expense under the direct write-off and allowance methods
The following selected transactions were taken from the records of Silhouette Company for the year ending December 31, 2012:
Mar. 4. | Wrote off account of Myron Rimando, $7,500. | |
May 19. | Received $2,000 as partial payment on the $10,000 account of Shirley Mason. Wrote off the remaining balance as uncollectible. | |
Aug. 7. | Received the $7,500 from Myron Rimando, which had been written off on March 4. Reinstated the account and recorded the cash receipt. | |
Dec. 31. | Wrote off the following accounts as uncollectible (record as one journal entry): | |
Brandon Peele | $ 5,000 | |
Clyde Stringer | 9,000 | |
Ned Berry | 13,000 | |
Mary Adams | 2,000 | |
Gina Bowers | 4,500 | |
Dec. 31. | Wrote off the following accounts as uncollectible (record as one journal entry): | |
a. Journalize the transactions for 2012 under the direct write-off method.
b. Journalize the transactions for 2012 under the allowance method, assuming that the allowance account had a beginning balance of $45,000 on January 1, 2012, and the company uses the analysis of receivables method. Silhouette Company prepared the following aging schedule for its accounts receivable:
Aging Class (Number | Receivables Balance | Estimated Percent of |
of Days Past Due) | on December 31 | Uncollectible Accounts |
0–30 days | $300,000 | 1% |
31–60 days | 80,000 | 4 |
61–90 days | 20,000 | 15 |
91–120 days | 10,000 | 40 |
More than 120 days | 40,000 | 80 |
Total receivables | $450,000 |
c. How much higher (lower) would Silhouette’s 2012 net income have been under the direct write-off method than under the allowance method?
10 years ago
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