Response to the following problem:
On February 28, Hourglass Computers had a $75,000 debit balance in Accounts Receivable. During March, Hourglass made sales of $445,000, all on credit. Other data for March include
• Collections on account, $422,600.
• Write-offs of uncollectible receivables, $3,500.
Required:
1. Record sales and collections on account. Then record uncollectible-account expense and write-offs of customer accounts using the allowance method. Show all March activity in Accounts Receivable. Allowance for Uncollectible Accounts, and UncollectibleAccount Expense (post to these T-accounts). The February 28 unadjusted balance in Allowance for Uncollectible Accounts was $800 (credit). Uncollectible-account expense was estimated at 2% of credit sales.
2. Suppose Hourglass Computers used a different method to account for uncollectible receivables. Record sales and collections on account. Then record uncollectible-account expense for March using the direct write-off method. Post to Accounts Receivable and Uncollectible-Accounts Expense and show their balances at March 31.
3. What amount of uncollectible-account expense would Hourglass Computers report on its March income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason. 4. What amount of net accounts receivable would Hourglass Computers report on its March 31 balance sheet under each of the two methods? Which amount is more realistic? Give your reason.