Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31: a. Journalize the write-offs under the direct write-off method. b. Journalize the write-offs under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,250,000 of credit sales during the year. Based on past history and industry averages, ¾% of credit sales are expected to be uncollectible. c. How much higher (lower) would Casebolt Company’s net income have been under the direct write-off method than under the allowance method?

Q: Expert Answer

To determine (a) Journalize the write-offs under the direct write-off method. Explanation Bad debt expense: Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense. Direct write-off method: This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible. Journalize the write offs under the direct write off method. Date Particulars Debit Credit Bad debt expense $30,000 (b) To determine Journalize the write-offs under allowance method (Percentage of sales method). (c) To determine Determine whether net income of Company RT is higher or lower under the direct-write off method than allowance method.

Question

Still sussing out bartleby?

Answer 1

BuyFind

Financial Accounting

15th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337272124

Solutions

Chapter

Section

Answer 2

BuyFind

Financial Accounting

15th Edition

Carl Warren + 2 others

Publisher: Cengage Learning

ISBN: 9781337272124

Solutions

Chapter

Section

Answer 3

Solutions

Chapter

Section

Answer 4

Chapter

Section

Answer 5

To determine

(a)

Journalize the write-offs under the direct write-off method.

Explanation of Solution

Bad debt expense: Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Direct write-off method: This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

Journalize the write offs under the direct write off method.

Date	Particulars	Debit	Credit
	Bad debt expense	$30,000

Answer 6

(b)

To determine

Journalize the write-offs under allowance method (Percentage of sales method).

Answer 7

(c)

To determine

Determine whether net income of Company RT is higher or lower under the direct-write off method than allowance method.

Financial Accounting

Solutions

Financial Accounting

Explanation of Solution

Still sussing out bartleby?

The Solution to Your Study Problems

Chapter 9 Solutions

Additional Business Textbook Solutions