Accounting for uncollectible accounts using the allowance (percent-of-sales) and direct write-off methods and reporting receivables on the balance sheet On August 31, 2018, Bouquet Floral Supply had a $140,000 debit balance in Accounts Receivable and a 55,600 credit balance in Allowance for Bad Debts. During September, Bouquet made: Sales on account, $550,000. Ignore Cost of Goods Sold. Collections on account, $584,000. Write-offs of uncollectible receivables, $4,000. Requirements Journalize all September entries using the allowance method. Bad debts expense was estimated at 2% of credit sales. Show all September activity in Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts). Using the same facts, assume that Bouquet used the direct write-off method to account for uncollectible receivables. Journalize all September entries using the direct write-off method. Post to Accounts Receivable and Bad Debts Expense, and show their balances on September 30, 2018. What amount of Bad Debts Expense would Bouquet report on its September income statement under each of the two methods? Which amount better matches expenses with revenue? Give your reason. What amount of net accounts receivable would Bouquet report on its September 30, 2018, balance sheet under each of the two methods? Which amount is more realistic? Give your reason.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter5: Sales And Receivables

Section: Chapter Questions

Problem 65E: Average Uncollectible Account Losses and Bad Debt Expense The accountant for Porile Company prepared...

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Accounting for uncollectible accounts using the allowance (percent-of-sales) and direct write-off methods and reporting receivables on the balance sheet

On August 31, 2018, Bouquet Floral Supply had a $140,000 debit balance in Accounts Receivable and a 55,600 credit balance in Allowance for Bad Debts. During September, Bouquet made:

Sales on account, $550,000. Ignore Cost of Goods Sold.
Collections on account, $584,000.
Write-offs of uncollectible receivables, $4,000.

Requirements

Journalize all September entries using the allowance method. Bad debts expense was estimated at 2% of credit sales. Show all September activity in Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts).
Using the same facts, assume that Bouquet used the direct write-off method to account for uncollectible receivables. Journalize all September entries using the direct write-off method. Post to Accounts Receivable and Bad Debts Expense, and show their balances on September 30, 2018.
What amount of Bad Debts Expense would Bouquet report on its September income statement under each of the two methods? Which amount better matches expenses with revenue? Give your reason.
What amount of net accounts receivable would Bouquet report on its September 30, 2018, balance sheet under each of the two methods? Which amount is more realistic? Give your reason.

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