Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Ca
ID: 2471123 • Letter: E
Question
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2014: Hide a. Journalize the write-offs for 2014 under the direct write-off method. If an amount box does not require an entry, leave it blank. Hide b. Journalize the write-offs for 2014 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during 2014. Based on past history and industry averages, ¾% of credit sales are expected to be uncollectible. 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 Casebolt Company's 2014 net income have been under the direct write-off method than under the allowance method? by $
Explanation / Answer
A.
Dr Bad Debt Expense 30,000
Cr Accounts Receivable 30,000
B.
To write off the accounts:
Dr Allowance for Doubtful Accounts 39,375 (5,250,000*3/4%)
Cr Accounts Receivable 39,375
Dr Bad Debt Expense 30,000
Cr Allowance for Doubtful Accounts 30,000
C.
Under the direct write-off method, bad debt expense was 30,300. Under the allowance method, bad debt expense was 39,375.
The difference is 39,375 - 30,000 = $9,375
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.