Seaforth International wrote off the following accounts receivable as uncollectible for theyear ending December 31:CustomerAmount$ 21,550Kim AbelLee Drake33,925Jenny Green27,565Mike Lamb19,460Total$102,500 The company prepared the following aging schedule for its accounts receivable onDecember 31:Aging Class (Numberof Days Past Due)Estimated Percent ofUncollectible AccountsReceivables Balanceon December 31$ 715,0000-30 days31-60 days61-90 days91-120 daysMore than 120 days1%310,000102,0001576,0003097,00060Total receivables$1,300,000a. Journalize the write-offs under the direct write-off method.b. Journalize the write-offs and the year-end adjusting entry under the allowance method,assuming that the allowance account had a beginning credit balance of $95,000 onJanuary 1 and the company uses the analysis of receivables method.c. How much higher (lower) would Seaforth International's net income have been underthe allowance method than under the direct write-off method?

Question
Asked Dec 17, 2019
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Seaforth International wrote off the following accounts receivable as uncollectible for the
year ending December 31:
Customer
Amount
$ 21,550
Kim Abel
Lee Drake
33,925
Jenny Green
27,565
Mike Lamb
19,460
Total
$102,500
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Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount $ 21,550 Kim Abel Lee Drake 33,925 Jenny Green 27,565 Mike Lamb 19,460 Total $102,500

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The company prepared the following aging schedule for its accounts receivable on
December 31:
Aging Class (Number
of Days Past Due)
Estimated Percent of
Uncollectible Accounts
Receivables Balance
on December 31
$ 715,000
0-30 days
31-60 days
61-90 days
91-120 days
More than 120 days
1%
310,000
102,000
15
76,000
30
97,000
60
Total receivables
$1,300,000
a. Journalize the write-offs under the direct write-off method.
b. Journalize the write-offs and the year-end adjusting entry under the allowance method,
assuming that the allowance account had a beginning credit balance of $95,000 on
January 1 and the company uses the analysis of receivables method.
c. How much higher (lower) would Seaforth International's net income have been under
the allowance method than under the direct write-off method?
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The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) Estimated Percent of Uncollectible Accounts Receivables Balance on December 31 $ 715,000 0-30 days 31-60 days 61-90 days 91-120 days More than 120 days 1% 310,000 102,000 15 76,000 30 97,000 60 Total receivables $1,300,000 a. Journalize the write-offs under the direct write-off method. b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning credit balance of $95,000 on January 1 and the company uses the analysis of receivables method. c. How much higher (lower) would Seaforth International's net income have been under the allowance method than under the direct write-off method?

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Expert Answer

Step 1

a.

Prepare journal entry under the direct write-off method:

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Date Particulars Debit Credit Bad debt expense S102,500 $21,550 Account receivable – Person KA Account receivable – Person LD Account receivable – Person JG $33,925 $27,565 Account receivable – Person ML $19,460 (To record the write-off of uncollectible account receivable )

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Step 2

B.

Prepare journal entry under allowance method :

 

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Particulars Date Debit Credit $102,500 Allowance for doubtful accounts $21,550 $33,925 $27,565 Account receivable – Person KA Account receivable – Person LD Account receivable – Person JG Account receivable – Person ML (To record the write-off of uncollectible account receivable ) $19,460 Bad debt expense $117,150 Allowance for doubtful accounts $117,150 (To adjust the allowance for doubtful accounts and to record the bad expense)

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Step 3

Working note:

&n...

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Estimate the balance of the allowance for doubtful accounts. Estimated uncollectible Age interval Balance accounts Регсеnt Amount 1-30 days past due 31-60 days past due 61-90 days past due 91-120 days past due More than 120 days Total $715,000 $310,000 1% $7,150 $6,200 2% $102,000 $15,300 $22,800 15% $76,000 $97.000 $1,300.000 30% $58.200 $109,650 60% Prepare T-account for allowance for doubtful accounts to determine the amount to be adjusted as bad debt expense. Allowance for doubtful accounts Credit Date Particulars Debit Date Particulars Accounts receivable (Write $102,500 offs) January Beginning balance $95,000 Bad debt expense (Adjustments) (Balancing figure) $117,150 Total $102.500 Total $212.150 $109,650 Ending balance

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