Entries for bad debt expense under the direct write-off and allowance methods
Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2014:
|
Customer
|
Amount
|
|
Shawn Brooke
|
4650
|
|
Eve Denton
|
5180
|
|
Art Malloy
|
11050
|
|
Cassie Yost
|
9120
|
|
Total
|
30000
|
a. Journalize the write-offs for 2014 under the direct write-off method.
b. Journalize the write-offs for 2014 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during 2014. Based on past history and industry averages, ¾% of credit sales are expected to be uncollectible.
c. How much higher (lower) would Casebolt Company's 2014 net income have been under the direct write-off method than under the allowance method?