Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Method

The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31:

June 8.

Wrote off account of Kathy Quantel, $5,400.

Aug. 14.

Received $3,830 as partial payment on the $9,670 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.

Oct. 16.

Received the $5,400 from Kathy Quantel, whose account had been written off on June 8. Reinstated the account and recorded the cash receipt.

Dec. 31.

Wrote off the following accounts as uncollectible (record as one journal entry):

Wade Dolan	$1,570
Greg Gagne	970
Amber Kisko	3,730
Shannon Poole	2,160
Niki Spence	590

Dec. 31.

If necessary, record the year-end adjusting entry for uncollectible accounts.

If no entry is required, select "No entry" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $16,200 at the beginning of the year and the company uses the analysis of receivables method. Rustic Tables Company prepared the following aging schedule for its accounts receivable:

Aging Class (Number of Days Past Due)									Receivables Balance on December 31				Estimated Percent of Uncollectible Accounts
								0-30 days	$259,000				3	%
								31-60 days	97,000				9
								61-90 days	31,000				20
								91-120 days	11,000				45
								More than 120 days	16,000				80
								Total receivables	$414,000

c. How much higher (lower) would Rustic Tables net income have been under the direct write-off method than under the allowance method?

a. Journalize the transactions under the direct write-off method. June 8 Allowance for Doubtful Accounts Aug. 14 Cash Oct. 16 Oct. 16 III II II III II II IIIIII II Id Dec. 31 Dec. 31 June 8 Aug. 14 Oct. 16 II III II II III II II II II Oct. 16 Dec. 31 Dec. 31 Il II c. How much higher (lower) would Rustic Tables' net income have been under the direct write-off method than under the allowance method? by