At December 31, 2017, the trial balance of Darby Company contained the following

Question

At December 31, 2017, the trial balance of Darby Company contained the following amounts before Debit $372,000 Credit Allowance for Doubtful Accounts Sales Revenue 1,300 975,200 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? 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 $12,400 of accounts receivable will be uncollectible. (2) The company estimates that 1% of sales will be uncollectible. (b) (c) Repeat part (b) assuming that instead of a credit balance there is an $1,300 debit balance in (d) During the next month, January 2018, a $3,400 account receivable is written off as (e) Repeat part (d) assuming that Darby uses the direct write-off method instead of the allowance (Credit account titles are automatically indented when amount is entered. Do not indent Allowance for Doubtful Accounts. uncollectible. Prepare the journal entry to record the write-off method in accounting for uncollectible accounts receivable. manually.) No Account Titles Debit Credit (b) (1) Dec. 31 (2) Dec. 31 (c) (1) Dec. 31 (2) Dec. 31 https://edugen.wileyplus.com/edugen/shared/assignment test/gprint.uni 3/8/2018 Question Attempts: 0 of 1 used

Explanation / Answer

Solution a:

As company is using allowance for doubtful account in trial balance, it means Darby company is using allowance method of accounting for bad debts.

Solution b:

Solution c:

Solution d:

Solution e:

Adjusting Journal Entries - Darby Company S. No. Particulars Debit Credit 1 Uncollectible account expense Dr ($12,400 - $1,300) $11,100.00                To allowance for doubtful accounts $11,100.00 (Being allowance for doubtful accounts provided) 2 Uncollectible account expense Dr ($975200*1% - $1,300) $8,452.00                To allowance for doubtful accounts $8,452.00 (Being allowance for doubtful accounts provided)

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