EX 8-13 Entries for bad debt expense under the direct write-off and allowance Ob

Question

EX 8-13 Entries for bad debt expense under the direct write-off and allowance Obj. 5 methods The following selected transactions were taken from the records of Shipway Company for the r first year of its operations ending December 31: Apr. 13. Wrote off account of Dean Sheppard, $8,450. May 15. Received $500 as partial payment on the $7,100 account of Dan Pyle. Wrote off the remaining balance as July 27. Received $8,450 from Dean Sheppard, whose account had been written off on April 13. Reinstated the Dec. 31. Wrote off the following accounts as uncollectible (record as one journal entry): uncollectible. account and recorded the cash receipt. Paul Chapman Duane DeRosa Teresa Galloway Ernie Klatt Marty Richey $2,225 3,550 4,770 1,275 1,690 31. If necessary, record the year-end adjusting entry for uncollectible accounts. A. Journalize the transactions under the direct write-off method. B. Journalize the transactions under the allowance method. Shipway Company uses the percent of credit sales method of estimating uncollectible accounts expense. Based on past history and industry averages, ¾% of credit sales are expected to be uncollectible. Shipway recorded $3,778,000 of credit sales during the year C. How much higher (lower) would Shipway Company's net income have been under the direct write-off method than under the allowance method?

Explanation / Answer

Date Particulars Debit Credit Apr-13 Wrote off account of Dean sheppard Bad debt expense 8450     Accounts receivable - Dean Shepard 8450 May-15 Received $500 as partial payment on the $7100 account of Dan pyle Cash 500 Bad Debt expense 6600       Accounts receivable - Dan pyle 7100 Jul-27 Received $8450 from dean sheppard, whose account had been written off on April 13 Accounts receivable - Dean sheppard 8450       Bad debt expense 8450 Cash 8450      Accounts receivable - Dean sheppard 8450 Dec-31 wrote off the following accounts as uncollectible Bad Debt expense 13510      Accounts receivable - Pual chapman 2225     Accounts receivable - Duane Derosa 3550     Accounts receivable - Teresa Galloway 4770     Accounts receivable - Ernie Klatt 1275      Accounts receivable- Marty Richey 1690 B Journalize transactions under the allowance method Apr-13 Allowance for Doubtful Accounts 8450     Accounts receivable - Dean Shepard 8450 May-15 Cash 500 Allowance for Doubtful Accounts 6600       Accounts receivable - Dan pyle 7100 Jul-27 Accounts receivable - Dean sheppard 8450          Allowance for Doubtful Accounts 8450 Cash 8450     Accounts receivable - Dean sheppard 8450 Dec-31 Allowance for Doubtful Accounts 13510      Accounts receivable - Pual chapman 2225     Accounts receivable - Duane Derosa 3550     Accounts receivable - Teresa Galloway 4770     Accounts receivable - Ernie Klatt 1275      Accounts receivable- Marty Richey 1690 Dec-31 Bad debts 28335     Allowance for Doubtful Accounts 28335 (3778000* 0.75%) C Particulars $ Allowance Method $28,335 Direct write off method $20,110 ($8450+$6600-$8450+$13510) Difference $8,225

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.