Required information [The following information applies to the questions displayed below.] At the beginning of Year 1, a company has a balance of $24,800 in accounts receivable. Because the company is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of Year 1, the company wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that the company now will need to use the allowance method. The following transactions occur during Year 1 and Year 2. 1. During Year 1, install air conditioning systems on account, $178,000. 2. During Year 1, collect $173,000 from customers on account. 3. At the end of Year 1, estimate that uncollectible accounts total 20% of ending accounts receivable. 4. In Year 2, customers' accounts totaling $6,800 are written off as uncollectible. 3. Calculate bad debt expense for 2021 and 2022 under the allowance method and under the direct write-off method, prior to any adjusting entries in 2022. (Leave no cells blank.) Allowance Method Direct Write-off Bad Debt Expense Method Year 1: Year 2:

Required information [The following information applies to the questions displayed below.] At the beginning of Year 1, a company has a balance of $24,800 in accounts receivable. Because the company is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of Year 1, the company wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that the company now will need to use the allowance method. The following transactions occur during Year 1 and Year 2. 1. During Year 1, install air conditioning systems on account, $178,000. 2. During Year 1, collect $173,000 from customers on account. 3. At the end of Year 1, estimate that uncollectible accounts total 20% of ending accounts receivable. 4. In Year 2, customers' accounts totaling $6,800 are written off as uncollectible. 3. Calculate bad debt expense for 2021 and 2022 under the allowance method and under the direct write-off method, prior to any adjusting entries in 2022. (Leave no cells blank.) Allowance Method Direct Write-off Bad Debt Expense Method Year 1: Year 2:

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 44P

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