The Empire District Electric Company serves customers in the region where the st

Question

The Empire District Electric Company serves customers in the region where the states of Kansas, Missounri, and Oklahoma come together. Empire District uses the allowance method for recognizing uncollectible accounts. The company's January 1, 2003 balance sheet showed accounts receivable of $21, 993, 819, The footnotes revealed that this was net of uncollectible accounts of $679.000. Suppose Empire District wrote off a specific uncollectible accounts for $8,000 on January 2, 2003. Assume this was the only transaction affecting the accounts receivable or allowable accounts on that day. Give the journal entry to record this write - off. What would the balance sheet show for accounts receivable t the end of the day on January 2. Suppose Empire District used the specific write - off method instead of the allowance method for recognizing uncollectible accounts. Compute the accounts. Compare the accounts receivable balance that would be shown on the January 1, 2003, balance sheet.

Explanation / Answer

For number 1, both accounts are reduced by 8000. That is the only way they are affected in number 1. Since they are both reduced by 8000, the net amount shown on the balance sheet is not affected and is the same as before the write-off. January 1, AR 22,672,819 allowance 679,000 net shown on balance sheet 21,993,819 January 2 AR 22,664,819 allowance 671,000 net shown on balance sheet 21,993,819. For number 2, AR is 22,672,819 on January 1 on the balance sheet. There is no allowance account with this method. Under this methods accounts are written off as they are deemed uncollectible by debiting bad debt expense and crediting accounts receivable.

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