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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 days 310,000 2   
61-90 days 102,000 15   
91-120 days 76,000 30   
More than 120 days 97,000 60   
Total receivables $1,300,000

a. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.

b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning credit balance of $95,000 on January 1 and the company uses the analysis of receivables method. For a compound transaction, if an amount box does not require an entry, leave it blank.

Write-off
Adjustment

c. How much higher (lower) would Seaforth International's net income have been under the allowance method than under the direct write-off method?
  $

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ekkarill92 answered 1 year ago
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