In: Accounting
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. |