Question

On October 31, 2014, Blossom Floral Supply had a $ 180,000 debit balance in Accounts Receivable and a $ 7,200 credit balance in Allowance for Bad Debts. During November, Blossom made the following transactions:
• Sales on account, $ 560,000. Ignore Cost of Goods Sold.
• Collections on account, $ 598,000.
• Write-offs of uncollectible receivables, $ 9,000.

Requirements
1. Journalize all November entries using the allowance method. Bad debts expense was estimated at 1% of credit sales. Show all November activity in Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts).
2. Using the same facts, assume that Blossom used the direct write- off method to account for uncollectible receivables. Journalize all November entries using the direct write-off method. Post to Accounts Receivable and Bad Debts Expense and show their balances at November 30, 2014.
3. What amount of Bad Debts Expense would Blossom report on its November income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason.
4. What amount of net accounts receivable would Blossom report on its November 30, 2014, balance sheet under each of the two methods? Which amount is more realistic? Give your reason.



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  • CreatedJanuary 16, 2015
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