Explain Direct write off method and Allowance method of estimating bad debts expense.
Give general journal entries for the following transactions separately for (Direct write off (2) Allowance method (Percentage of sales and (3) Allowance method (Percentage of accounts receivable.
1) During year 1 a corporation made credit sales of $100,000 and made collections of $60,000; during year 2 the corporation made credit sales of $ 80000, made collections of $36500 from year 1 credit sales and $60000 from year 2 credit sales, and wrote-off credit sales from year 1in the amount of $3,500.Give general journal entries for year 1 and 2 assuming Direct write off method of uncollectible account receivable.
2) During year 1 a corporation made credit sales of $100,000 and made collections of $45,000; during year 2 the corporation made credit sales of $150,000, made collections of $20000 from year 1 credit sales and $100000 from year 2 credit sales, and wrote-off credit sales from year 1 in the amount of $600; the percentage-of-sales method was used to estimate bad debt expense; bad debt expense was estimated to be 1% of credit sales each year
Year 1 During year 1 a corporation made credit sales of $300,000 and made collections of $200,000.
Year 2 The corporation made credit sales of $400,000 and made collections 0f $50000 from year 1 credit sales and $250000 from year 2 credit sales,
It wrote-off actual bad debts losses of $3500 from year 1 credit sales.
The allowance for uncollectible accounts was estimated to be 3% of uncollected accounts receivable each year.
3 Year 1 During year 1 a corporation made credit sales of $300,000 and made collections of $200,000.
Year 2 the corporation made credit sales of $400,000 and made collections 0f $50000 from year 1 credit sales and $250000 from year 2 credit sales,
It wrote-off actual bad debts losses of $3500 from year 1 credit sales.
The allowance for uncollectible accounts was estimated to be 3% of uncollected accounts receivable each year.