On March 31, 2023, Summitt Manufacturing had a $290,000 debit balance in Accounts Receivable. During April, the

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On March 31, 2023, Summitt Manufacturing had a $290,000 debit balance in Accounts Receivable. During April, the business had sales revenue of $1,150,000, which included $990,000 in credit sales. Other data for April include the following:

a. Collections on accounts receivable, $910,000.

b. Write-offs of uncollectible receivables, $4,500.


Required

1. Record bad debt expense for April by the direct write-off method. Use T-accounts to show all April activity in Accounts Receivable and Bad Debt Expense.

2. Record bad debt expense and write-offs of customer accounts for April by the allowance method. Use T-accounts to show all April activity in Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. The March 31 unadjusted balance in Allowance for Doubtful Accounts was $1,200 (debit). Bad debt expense was estimated at 1 percent of credit sales.

3. What amount of bad debt expense would Summitt report on its April income statement under the two methods? Which amount better matches expense with revenue? Give your reason.

4. What amount of net accounts receivable would Summitt report on its April 30 balance sheet under the two methods? Which amount is more realistic? Give your reason.

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Horngrens Accounting Volume 1

ISBN: 9780136889373

12th Canadian Edition

Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura

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