Branson Shipping uses the direct write-off method in dealing with uncollectible accounts because it is highly unusual that the business ever has bad debts, and when they do they are not material in relation to total sales.
2016
Oct. 15 Shipped goods for Marine Specialties on account, $2,200.
2017
May 15 Received notice of bankruptcy from Marine Specialties and wrote off the amount they owed from the October 15 sale.
1. Journalize the transactions.
2. What is the major flaw in using the direct write-off method as opposed to the allowance method?