Question: During 20X1 the Downtown Department Store had credit sales of

During 20X1, the Downtown Department Store had credit sales of $900,000. The store manager expects that 2% of the credit sales will never be collected, although no accounts are written off until 10 assorted steps have been taken to attain collection. The 10 steps require a minimum of 14 months. Assume that during 20X2 specific customers are identified who are never expected to pay $16,000 that they owe from the sales of 20X1. All 10 collection steps have been completed.
1. Show the impact on the balance sheet equation of the preceding transactions in 20X1 and 20X2 under
(a) The specific write-off method,
(b) The allowance method. Which method do you prefer? Why?
2. Prepare journal entries for both methods. Omit explanations.

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  • CreatedFebruary 20, 2015
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