How much higher (lower) would Rustic Tables’ net income have been under the direct write-off method than under the allowance method?
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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
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, $4,710. |
| Aug. 14. | Received $3,340 as partial payment on the $8,430 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible. |
| Oct. 16. | Received the $4,710 from Kathy Quantel, which 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 |
| Wade Dolan | $1,370 |
| Greg Gagne | 850 |
| Amber Kisko | 3,250 |
| Shannon Poole | 1,880 |
| Niki Spence | 520 |
Dec. 31 If necessary, record the year-end
The company prepared the following aging schedule for its
| Aging Class (Number of Days Past Due) |
Receivables Balance on December 31 |
Estimated Percent of Uncollectible Accounts |
||||||||||||
| 0-30 days | $226,000 | 1 | % | |||||||||||
| 31-60 days | 85,000 | 9 | ||||||||||||
| 61-90 days | 27,000 | 30 | ||||||||||||
| 91-120 days | 10,000 | 55 | ||||||||||||
| More than 120 days | 14,000 | 85 | ||||||||||||
| Total receivables | $362,000 |
For those amount boxes in which no entry is required, leave the box blank. If an account is not required, select "No entry" from the dropdown box(es).
a. Journalize the transactions under the direct write-off method.
| June 8 | fill in the blank 7fcafffd9fee025_2 | ||
| fill in the blank 7fcafffd9fee025_4 | |||
| Aug. 14 | fill in the blank 7fcafffd9fee025_6 | fill in the blank 7fcafffd9fee025_7 | |
| fill in the blank 7fcafffd9fee025_9 | fill in the blank 7fcafffd9fee025_10 | ||
| fill in the blank 7fcafffd9fee025_12 | fill in the blank 7fcafffd9fee025_13 | ||
| Oct. 16-reinstate | fill in the blank 7fcafffd9fee025_15 | ||
| fill in the blank 7fcafffd9fee025_17 | |||
| Oct. 16-collection | fill in the blank 7fcafffd9fee025_19 | ||
| fill in the blank 7fcafffd9fee025_21 | |||
| Dec. 31-write-off | fill in the blank 7fcafffd9fee025_23 | fill in the blank 7fcafffd9fee025_24 | |
| fill in the blank 7fcafffd9fee025_26 | fill in the blank 7fcafffd9fee025_27 | ||
| fill in the blank 7fcafffd9fee025_29 | fill in the blank 7fcafffd9fee025_30 | ||
| fill in the blank 7fcafffd9fee025_32 | fill in the blank 7fcafffd9fee025_33 | ||
| fill in the blank 7fcafffd9fee025_35 | fill in the blank 7fcafffd9fee025_36 | ||
| fill in the blank 7fcafffd9fee025_38 | fill in the blank 7fcafffd9fee025_39 | ||
| Dec. 31-adjusting | fill in the blank 7fcafffd9fee025_41 | ||
| fill in the blank 7fcafffd9fee025_43 |
b. Journalize the transactions under the allowance method, assuming that the allowance account had a beginning balance of $14,130 at the beginning of the year and the company uses the analysis of receivables method.
| June 8 | fill in the blank c3d14c00e06d049_2 | ||
| fill in the blank c3d14c00e06d049_4 | |||
| Aug. 14 | fill in the blank c3d14c00e06d049_6 | fill in the blank c3d14c00e06d049_7 | |
| fill in the blank c3d14c00e06d049_9 | fill in the blank c3d14c00e06d049_10 | ||
| fill in the blank c3d14c00e06d049_12 | fill in the blank c3d14c00e06d049_13 | ||
| Oct. 16-reinstate | fill in the blank c3d14c00e06d049_15 | ||
| fill in the blank c3d14c00e06d049_17 | |||
| Oct. 16-collection | fill in the blank c3d14c00e06d049_19 | ||
| fill in the blank c3d14c00e06d049_21 | |||
| Dec. 31-write-off | fill in the blank c3d14c00e06d049_23 | fill in the blank c3d14c00e06d049_24 | |
| fill in the blank c3d14c00e06d049_26 | fill in the blank c3d14c00e06d049_27 | ||
| fill in the blank c3d14c00e06d049_29 | fill in the blank c3d14c00e06d049_30 | ||
| fill in the blank c3d14c00e06d049_32 | fill in the blank c3d14c00e06d049_33 | ||
| fill in the blank c3d14c00e06d049_35 | fill in the blank c3d14c00e06d049_36 | ||
| fill in the blank c3d14c00e06d049_38 | fill in the blank c3d14c00e06d049_39 | ||
| Dec. 31-adjusting | fill in the blank c3d14c00e06d049_41 | ||
| fill in the blank c3d14c00e06d049_43 |
c. How much higher (lower) would Rustic Tables’ net income have been under the direct write-off method than under the allowance method?
by fill in the blank 33b6dd081077053_2
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