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In: Accounting

At December 31, 2017, the trial balance of Darby Company contained the following amounts before adjustment....

At December 31, 2017, the trial balance of Darby Company contained the following amounts before adjustment.

Debit

Credit

Accounts Receivable $370,000
Allowance for Doubtful Accounts $ 1,300
Sales Revenue 961,800

(a) Based on the information given, which method of accounting for bad debts is Darby Company using—the direct write-off method or the allowance method?

(b) Prepare the adjusting entry at December 31, 2017, for bad debt expense under each of the following independent assumptions.
(1) An aging schedule indicates that $10,800 of accounts receivable will be uncollectible.
(2) The company estimates that 1% of sales will be uncollectible.
(c) Repeat part (b) assuming that instead of a credit balance there is an $1,300 debit balance in Allowance for Doubtful Accounts.
(d) During the next month, January 2018, a $3,100 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.
(e) Repeat part (d) assuming that Darby uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.

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