Problem 8-5A At December 31, 2017, the trial balance of Darby Company contained the following amounts before adjustment. Debit Credit Accounts Receivable $400,000 Allowance for Doubtful Accounts $ 1,400 Sales Revenue 935,400
(a) 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?
(b) 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 $11,000 of accounts receivable will be collectible.
(2) The company estimates that 1% of sales will be collectible.
(c) Repeat part (b) assuming that instead of a credit balance there is an $1,400 debit balance in Allowance for Doubtful Accounts.
(d) During the next month, January 2018, a $2,800 account receivable is written off as collectible. Prepare the journal entry to record the write-off.
(e) Repeat part (d) assuming that Darby uses the direct write-off method instead of the allowance method in accounting for collectible accounts receivable.