# Direct write-off method Journalize the following transactions, using the direct write-off method of accounting for uncollectible receivables: Oct. 2. Received $600 from Rachel Elpel and wrote off the remainder owed of$1,350 as uncollectible. Dec. 20. Reinstated d1e account of Rachel Elpel and received $1,350 cash in full payment. BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 #### Solutions Chapter Section Chapter 9, Problem 9.1BPE Textbook Problem ## Direct write-off methodJournalize the following transactions, using the direct write-off method of accounting for uncollectible receivables: Oct. 2. Received$600 from Rachel Elpel and wrote off the remainder owed of $1,350 as uncollectible. Dec. 20. Reinstated d1e account of Rachel Elpel and received$1,350 cash in full payment.

Expert Solution
To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

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.

To journalize: The given transactions, using direct write-off method of accounting for uncollectibles.

### Explanation of Solution

Prepare the journal entry to record the collection of cash and write-off of uncollectible accounts, under direct write-off method.

 Date Particulars Debit Credit October 2 Cash $600 Bad debt expense$1,350 Account receivable – Person RE $1,950 (To record cash collection and write-off of uncollectible account receivable ) Table (1) Description: To record the collection of cash on account, cash account must be increased and accounts receivable must be decreased by$600.

To record this write-off of uncollectible receivables under direct write-off method, bad debt expense must be recognized as well as increased, and accounts receivable must be decreased by $1,350. Hence, • Increase in cash (asset account) is debited with$600
• Increase in bad debt expense (decreases the stockholders’ equity accounts) is debited with $1,350, and • Decrease in accounts receivable (asset account) is credited with ($600+$1,350)$1,950.

Reinstate the account of Person RE and record the collection of cash on account

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