Question

Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Method The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31: June 8. Wrote off account of Kathy Quantel, $5,970. Aug. 14. Received $4,240 as partial payment on the $10,690 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible. Oct. 16. Received the $5,970 from Kathy Quantel, which had been written off on June 8. Reinstated the account and recorded the cash receipt. Dec. 31. Wrote off the following accounts as uncollectible (record as one journal entry): Wade Dolan $1,730 Greg Gagne 1,070 Amber Kisko 4,120 Shannon Poole 2,390 Niki Spence 660 Dec. 31 If necessary, record the year-end adjusting entry for the uncollectible accounts. The company prepared the following aging schedule for its accounts receivable: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0-30 days $287,000 3 % 31-60 days 107,000 9 61-90 days 34,000 25 91-120 days 13,000 50 More than 120 days 17,000 90 Total receivables $458,000 For those amount boxes in which no entry is required, leave the box blank. If an account is not required, select "No entry" from the dropdown box(es). a. Journalize the transactions under the direct write-off method. June 8 Bad Debt Expense Accounts Receivable-Kathy Quantel Aug. 14 Cash Bad Debt Expense Accounts Receivable-Rosalie Oakes Oct. 16-reinstate Accounts Receivable-Kathy Quantel Bad Debt Expense Oct. 16-collection Cash Accounts Receivable-Kathy Quantel Dec. 31-write-off Bad Debt Expense Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne Accounts Receivable-Amber Kisko Accounts Receivable-Shannon Poole Accounts Receivable-Niki Spence Dec. 31-adjusting No entry No entry b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $17,910 at the beginning of the year and the company uses the analysis of receivables method. June 8 Allowance for Doubtful Accounts Accounts Receivable-Kathy Quantel Aug. 14 Cash Allowance for Doubtful Accounts Accounts Receivable-Rosalie Oakes Oct. 16-reinstate Accounts Receivable-Kathy Quantel Allowance for Doubtful Accounts Oct. 16-collection Cash Accounts Receivable-Kathy Quantel Dec. 31-write-off Allowance for Doubtful Accounts Accounts Receivable-Wade Dolan Accounts Receivable-Greg Gagne Accounts Receivable-Amber Kisko Accounts Receivable-Shannon Poole Accounts Receivable-Niki Spence Dec. 31-adjusting Bad Debt Expense Allowance for Doubtful Accounts c. How much higher (lower) would Rustic Tables’ net income have been under the direct write-off method than under the allowance method?

Answer 1