Direct write-off method. Harrisburg Company, which began business in early 2007, reported $40,000 of accounts receivable on the December 31, 2007, balance sheet. Included in this amount was $550 for a sale made to Tom Mattingly in July. On January 4, 2008, the company learned that Mattingly had filed for personal bankruptcy. Harrisburg uses the direct write-off method to account for uncollectibles.
a. Prepare the journal entry needed to write off Mattingly%u2019s account.
b. Comment on the ability of the direct write-off method to value receivables on the year-end balance sheet.