Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods Th

Question

Entries for Bad Debt Expense under the Direct Write-Off and Allowance Methods The following selected transactions were taken from the records of Shipway Company for the first year of its operations ending December 31 Apr. 13. Wrote off account of Dean Sheppard, $2,820. May 15. Received $1,410 as partial payment on the $3,750 account of Dan Pyle. Wrote off the remaining balance as uncollectible. July 27. Received $2,820 from Dean Sheppard, whose account had been written off on April 13. Reinstated the account and recorded the cash receipt. Dec. 31. Wrote off the following accounts as uncollectible (record as one journal entry): Paul Chapman Duane DeRosa Teresa Galloway $1,890 1,410 850 1,180 420 Marty Richey Dec. 31 If necessary, record the year-end adjusting entry for uncollectible accounts. For those amount boxes in which no entry is required, leave the box blank. If an entry is not required, select "No entry" from the dropdown box(es).

Explanation / Answer

Journal entries under Direct Write off method Journal entries under Allowance method Date Account titles Debit Credit Date Account titles Debit Credit Apr.13 Bad debt expense $2,820.00 Apr.13 Allowance for Doubtful accounts $2,820.00 Accounts Receivables - Dean Sheppard $2,820.00 Accounts Receivables - Dean Sheppard $2,820.00 May.15 Cash $1,410.00 May.15 Cash $1,410.00 Bad debt expense $2,340.00 Allowance for Doubtful accounts $2,340.00 Accounts Receivables - Dan Pyle $3,750.00 Accounts Receivables - Dan Pyle $3,750.00 July.27 Accounts Receivables - Dean Sheppard $2,820.00 July.27 Accounts Receivables - Dean Sheppard $2,820.00 Bad debt expense $2,820.00 Allowance for Doubtful accounts $2,820.00 July.27 Cash $2,820.00 July.27 Cash $2,820.00 Accounts Receivables - Dean Sheppard $2,820.00 Accounts Receivables - Dean Sheppard $2,820.00 Dec.31 Bad debt expense $5,750.00 Dec.31 Allowance for Doubtful accounts $5,750.00 Accounts Receivables - Paul Chapman $1,890.00 Accounts Receivables - Paul Chapman $1,890.00 Accounts Receivables - Duane DeRosa $1,410.00 Accounts Receivables - Duane DeRosa $1,410.00 Accounts Receivables - Teresa Galloway $850.00 Accounts Receivables - Teresa Galloway $850.00 Accounts Receivables - Ernie Klatt $1,180.00 Accounts Receivables - Ernie Klatt $1,180.00 Accounts Receivables - Marty Richey $420.00 Accounts Receivables - Marty Richey $420.00 Dec.31 No Entry Dec.31 Bad debt Expense $13,752.00 Allowance for Doubtful accounts $13,752.00 Expected uncollectible at year end = 3% of credit sales = 3% * $458400 = $13,752

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