Entries for bad debt expense under the direct write-off and allowance methods Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Kim Abel Lee Drake Jenny Green Mike Lamb Total Aging Class (Number of Days Past Due) 0-30 days 31-60 days 61-90 days 91-120 days More than 120 days Total receivables The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) 0-30 days 31-60 days 61-90 days 91-120 days More than 120 days Total receivables Bad Debt Expense Accounts Receivable-Kim Abel Amount $24,200 34,150 29,700 17,600 $105,650 $735,000 300,000 110,000 75,000 95,000 $1,315,000 Accounts Receivable-Lee Drake Accounts Receivable-Jenny Green Accounts Receivable-Mike Lamb Receivables Balance on December 31 Receivables Balance on December 31 Allowance for Doubtful Accounts Accounts Receivable-Kim Abel Accounts Receivable-Lee Drake Accounts Receivable-Jenny Green Accounts Receivable-Mike Lamb Feedback Bad Debt Expense Allowance for Doubtful Accounts $735,000 300,000 110,000 75,000 95,000 $1,315,000 Estimated Percent of Uncollectible Accounts a. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank. 105,650 ✔ 1% 2 15 30 105,650 60 0 X Estimated Percent of Uncollectible Accounts 24,200 ✓ b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $91,1 and the company uses the analysis of receivables method. If an amount box does not require an entry, leave it blank. 34,150 29,700 ✔ 17,600 ✓ 24,200 34,150 ✓ 29,700 ✓ 1% 17,600 ✓ 2 15 30 60 0 X Check My Work Under the allowance method once a customer account is identified as uncollectible, it is written off against the allowance account. C. How much higher (lower) would Seaforth International's net income have been under the allowance method than under the direct write-off method? Lower X
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
![Entries for bad debt expense under the direct write-off and allowance methods
Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31:
Customer
Kim Abel
Lee Drake
Jenny Green
Mike Lamb
Total
Aging Class (Number
of Days Past Due)
0-30 days
31-60 days
61-90 days
91-120 days
More than 120 days
Total receivables
The company prepared the following aging schedule for its accounts receivable on December 31:
Aging Class (Number
of Days Past Due)
0-30 days
31-60 days
61-90 days
91-120 days
More than 120 days
Total receivables
Bad Debt Expense
Accounts Receivable-Kim Abel
Accounts Receivable-Lee Drake
Accounts Receivable-Jenny Green
Accounts Receivable-Mike Lamb
Allowance for Doubtful Accounts
Accounts Receivable-Kim Abel
Accounts Receivable-Lee Drake
Accounts Receivable-Jenny Green
Accounts Receivable-Mike Lamb
Bad Debt Expense
Amount
$24,200
34,150
29,700
17,600
$105,650
Allowance for Doubtful Accounts
Feedback
Receivables Balance
on December 31
$735,000
300,000
110,000
75,000
95,000
$1,315,000
Receivables Balance
on December 31
$735,000
300,000
110,000
75,000
95,000
$1,315,000
Feedback
Estimated Percent of
Uncollectible Accounts
a. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank.
105,650 ✔
1%
105,650 ✔
2
15
30
0 X
60
b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $91,150
and the company uses the analysis of receivables method. If an amount box does not require an entry, leave it blank.
Estimated Percent of
Uncollectible Accounts
24,200 ✔
34,150
29,700
17,600
24,200
34,150
29,700
17,600
1%
2
15
30
60
0 X
Check My Work
Under the allowance method once a customer account is identified as uncollectible, it is written off against the allowance account.
c. How much higher (lower) would Seaforth International's net income have been under the allowance method than under the direct write-off method?
Lower
X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F331c4ec0-230e-4d7a-b474-66b4dd622285%2F893f021a-885a-46f4-979f-ce37fd8b2c4c%2F2ibo6qn_processed.png&w=3840&q=75)
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