Entries for bad debt expense under the direct write-off and allowance methods The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31: June 8. Wrote off account of Kathy Quantel, $8,440. Aug. 14. Received $3,000 as partial payment on the $12,500 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible. Oct. 16. Received the $8,440 from Kathy Quantel, whose account had been written off on June 8. Reinstated the account and recorded the cash receipt. Dec 31. Wrote off the following accounts as uncollectible (record as one journal entry): Wade Dolan $4,600 Greg Gagne 3,600 Amber Kisko 7,150 Shannon Poole 2,975 Niki Spence 6,630 31. If necessary, record the year-end adjusting entry for uncollectible accounts. A. Journalize the transactions under the direct write-off method. B. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $36,000 at the beginning of the year and the company uses the analysis of receivables method. Rustic Tables Company prepared the following aging schedule for its accounts receivable: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0-30 days $320,000 1% 31-60 days 110,000 3 61-90 days 24,000 10 91-120 days 18,000 33 More than 120 days 43,000 75 Total receivables $515,000 C. How much higher (lower) would Rustic Tables' net income have been under the direct write-off method than under the allowance method?

BuyFind

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535
BuyFind

Corporate Financial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781305653535

Solutions

Chapter
Section
Chapter 8, Problem 8.14EX
Textbook Problem

Entries for bad debt expense under the direct write-off and allowance methods

The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31:

June 8. Wrote off account of Kathy Quantel, $8,440.
Aug. 14. Received $3,000 as partial payment on the $12,500 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.
Oct. 16. Received the $8,440 from Kathy Quantel, whose account had been written off on June 8. Reinstated the account and recorded the cash receipt.
Dec 31. Wrote off the following accounts as uncollectible (record as one journal entry):
Wade Dolan $4,600
Greg Gagne 3,600
Amber Kisko 7,150
Shannon Poole 2,975
Niki Spence 6,630
  31. If necessary, record the year-end adjusting entry for uncollectible accounts.
  1. A. Journalize the transactions under the direct write-off method.
  2. B. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $36,000 at the beginning of the year and the company uses the analysis of receivables method. Rustic Tables Company prepared the following aging schedule for its accounts receivable:
Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts
0-30 days $320,000 1%
31-60 days 110,000 3
61-90 days 24,000 10
91-120 days 18,000 33
More than 120 days 43,000 75
Total receivables $515,000  
  1. C. How much higher (lower) would Rustic Tables' net income have been under the direct write-off method than under the allowance method?

Expert Solution

Want to see the full answer?

Check out a sample textbook solution.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Chapter 8 Solutions

Corporate Financial Accounting
Ch. 8 - Direct write-off method Journalize the following...Ch. 8 - Allowance method Journalize the following...Ch. 8 - Percent of sales method At the end of the current...Ch. 8 - Analysis of receivables method At the end of the...Ch. 8 - Note receivable Prefix Supply Company received a...Ch. 8 - Classifications of receivables The Boeing Company...Ch. 8 - Nature of uncollectible accounts MGM Resorts...Ch. 8 - Entries for uncollectible accounts, using direct...Ch. 8 - Entries for uncollectible receivables, using...Ch. 8 - Entries to write off accounts receivable Creative...Ch. 8 - Providing for doubtful accounts At the end of the...Ch. 8 - Number of days past due Toot Auto Supply...Ch. 8 - Aging of receivables schedule The accounts...Ch. 8 - Estimating allowance for doubtful accounts Evers...Ch. 8 - Adjustment for uncollectible accounts Using data...Ch. 8 - Estimating doubtful accounts Outlaw Bike Co. is a...Ch. 8 - Entry for uncollectible accounts Using the data in...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Effect of doubtful accounts on net income During...Ch. 8 - Effect of doubtful accounts on net income Using...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Entries for bad debt expense under the direct...Ch. 8 - Determine due date and interest on notes Determine...Ch. 8 - Entries for notes receivable Valley Designs Issued...Ch. 8 - Entries for notes receivable The series of five...Ch. 8 - Entries for notes receivable, including year-end...Ch. 8 - Entries for receipt and dishonor of note...Ch. 8 - Entries for receipt and dishonor of notes...Ch. 8 - Receivables on the balance sheet List any errors...Ch. 8 - Allowance method entries The following...Ch. 8 - Aging of receivables; estimating allowance for...Ch. 8 - Compare two methods of accounting for...Ch. 8 - Details of notes receivable and related entries...Ch. 8 - Notes receivable entries The following data relate...Ch. 8 - Sales and notes receivable transactions The...Ch. 8 - Allowance method entries The following...Ch. 8 - Aging of receivables; estimating allowance for...Ch. 8 - Compare two methods of accounting for...Ch. 8 - Details of notes receivable and related entries...Ch. 8 - Notes receivable entries The following data relate...Ch. 8 - Sales and notes receivable transactions The...Ch. 8 - Continuing Company AnalysisAmazon: Accounts...Ch. 8 - Ralph Lauren: Accounts receivable turnover and...Ch. 8 - L Brands: Accounts receivable turnover and number...Ch. 8 - Ralph Lauren and L Brands: Average accounts...Ch. 8 - Ethics In Action Bud Lighting Co. is a retailer of...Ch. 8 - Communication On January 1, Xtreme Co. began...

Additional Business Textbook Solutions

Find more solutions based on key concepts
What four financial statements are contained in most annual reports?

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

In what ways is economics a science?

Brief Principles of Macroeconomics (MindTap Course List)

Assume that the risk-free rate is 4% and the market risk premium is 5%. What is the required return on the comp...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Discuss some of the techniques available to reduce risk exposure.

Fundamentals of Financial Management (MindTap Course List)