Question
In: Accounting
Explain the percentage of sales and the direct write off methods.
Explain the percentage of sales and the direct write off methods.
Solutions
Expert Solution
Percentage of sale method:
Percentage of sales method states that the amount of the baddebts expenses to be recognised is caliculated as the percentage of credit sales generated during the period. The balance in the allowances for doubtfull debts will not be considered in caliculating the baddebts in this method.
Example: The company XYZ is estimating that the 4% of the credit sales will be sonsidered as uncollectables( Baddebts) and the creditsales during the period is $300,000
Bad Debt expenses = $12,000 (300,000 * 4%)
Direct written off method:
This direct written of method involves charging the baddebt expenses only when the invoice value is not colleted from the customers. This will not involve change in the sales made earlier only increase in daddebts
Example: The company XYZ made a credit sale of $20,000 to a customer at the time of payment the customer is only able to pay $15,000 so the company will write off $5,000 from the customers account and charge the baddebt expense.
ekkarill92 answered 1 year agoRelated Solutions
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off...
Entries for Bad Debt Expense Under the Direct Write-Off and
Allowance Methods
Seaforth International wrote off the following accounts
receivable as uncollectible for the year ending December
31:
Customer
Amount
Kim Abel
$21,550
Lee Drake
33,925
Jenny Green
27,565
Mike Lamb
19,460
Total
$102,500
The company prepared the following aging schedule for its
accounts receivable on December 31:
Aging Class (Number
of Days Past Due)
Receivables Balance
on December 31
Estimated Percent of
Uncollectible Accounts
0-30 days
$715,000
1%
31-60...
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off...
Entries for Bad Debt Expense Under the Direct Write-Off and
Allowance Methods
Seaforth International wrote off the following accounts
receivable as uncollectible for the year ending December
31:
Customer
Amount
Kim Abel
$21,550
Lee Drake
33,925
Jenny Green
27,565
Mike Lamb
19,460
Total
$102,500
The company prepared the following aging schedule for its
accounts receivable on December 31:
Aging Class (Number
of Days Past Due)
Receivables Balance
on December 31
Estimated Percent of
Uncollectible Accounts
0-30 days
$715,000
1%
31-60...
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off...
Entries for Bad Debt Expense Under the Direct Write-Off and
Allowance Methods
Seaforth International wrote off the following accounts
receivable as uncollectible for the year ending December
31:
Customer
Amount
Kim Abel
$24,400
Lee Drake
34,000
Jenny Green
29,800
Mike Lamb
17,800
Total
$106,000
The company prepared the following aging schedule for its
accounts receivable on December 31:
Aging Class (Number
of Days Past Due)
Receivables Balance
on December 31
Estimated Percent of
Uncollectible Accounts
0-30 days
$735,000
1
%...
Describe the Direct Write off and Allowance methods of accounting for bad debts, including use of...
Describe the Direct Write off and
Allowance methods of accounting for bad debts,
including use of Balance Sheet and Percentage of Sales
calculations. Give examples (NOT from the textbook) of journalizing
reinstatement and collection of a previously written-off
account.
Direct Write-Off Method Journalize the following transactions, using the direct write-off method of accounting for uncollectible...
Direct Write-Off Method
Journalize the following transactions, using the direct
write-off method of accounting for uncollectible receivables:
Oct. 2: Received $2,250 from Matthew Chapman
and wrote off the remainder owed of $2,050 as uncollectible. If an
amount box does not require an entry, leave it blank.
Oct. 2
Dec. 20: Reinstated the account of Matthew
Chapman and received $2,050 cash in full payment.
Dec. 20-Reinstate
Dec. 20-Collection
Allowance Method
Journalize the following transactions, using the allowance
method of accounting for...
What is the difference between direct write-off method and allowance method? Direct write-off method, a company...
What is the
difference between direct write-off method and allowance
method?
Direct write-off
method, a company does not anticipate bad debt expense. The
allowance method is preferred over the direct write-off method
because the accounts receivable will be presented on the balance
sheet with a reduction called the allowance for doubtful
accounts.
Jan 1.
At the beginning of the year, AA prepared the Aging
of Accounts Receivable Schedule.
Complete the table.
Customer
Amount
Current
Number of Days Past Due
(Not...
Direct Write-Off Method Journalize the following transactions, using the direct write-off method of accounting for uncollectible...
Direct Write-Off Method
Journalize the following transactions, using the direct
write-off method of accounting for uncollectible receivables:
Oct. 2: Received $2,450 from William Pruitt and
wrote off the remainder owed of $2,330 as uncollectible. If an
amount box does not require an entry, leave it blank.
Oct. 2
Dec. 20: Reinstated the account of William
Pruitt and received $2,330 cash in full payment.
Dec. 20-Reinstate
Dec. 20-Collection
2.) Allowance Method
Journalize the following transactions, using the allowance
method of accounting...
Direct Write-Off Method Journalize the following transactions, using the direct write-off method of accounting for uncollectible...
Direct Write-Off Method
Journalize the following transactions, using the direct
write-off method of accounting for uncollectible receivables.
Oct. 2: Received $2,980 from Paula Spitler and
wrote off the remainder owed of $3,550 as uncollectible. If an
amount box does not require an entry, leave it blank.
Oct. 2
Dec. 20: Reinstated the account of Paula
Spitler and received $3,550 cash in full payment.
Reinstate
Collection
Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods The following selected transactions...
Entries for Bad Debt Expense under the Direct Write-Off and
Allowance Methods
The following selected transactions were taken from the records
of Shipway Company for the first year of its operations ending
December 31:
Apr. 13
Wrote off account of Dean Sheppard, $3,370.
May 15
Received $1,690 as partial payment on the $4,480 account of Dan
Pyle. Wrote off the remaining balance as uncollectible.
July 27
Received $3,370 from Dean Sheppard, whose account had been
written off on April 13....
Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods The following selected transactions...
Entries for Bad Debt Expense under the Direct Write-Off and
Allowance Methods
The following selected transactions were taken from the records
of Shipway Company for the first year of its operations ending
December 31:
Apr. 13
Wrote off account of Dean Sheppard, $5,280.
May 15
Received $2,640 as partial payment on the $7,020 account of Dan
Pyle. Wrote off the remaining balance as uncollectible.
July 27
Received $5,280 from Dean Sheppard, whose account had been
written off on April 13....
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