At December 31, 2010, the trial balance of Olpe Company contained the following amounts before adjustment.
Debits Credits
Accounts Receivable $200,000
Allowance for Doubtful Accounts $ 1,500
Sales 875,000
Instructions
(a) Prepare the adjusting entry at December 31, 2010, to record bad debts expense assuming that the aging schedule indicates that $10,800 of accounts receivable will be uncollectible.
(b) Repeat part (a) assuming that instead of a credit balance there is a $1,500 debit balance in the Allowance for Doubtful Accounts.
(c) During the next month, January 2011, a $2,700 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.
(d) Repeat part (c) assuming that Olpe Company uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.
(e)What are the advantages of using an aging schedule and the allowance method in accounting for uncollectible accounts as compared to the direct write-off method?