Morry Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31: Customer Amount J. Jackson $10,000 L. Stanton 9,500 C. Barton 13,100 S. Fenton 2,400 Total $35,000 a. Journalize the write-offs for the current year under the direct write-off method. If an amount box does not require an entry, leave it blank. b. Journalize the write-offs for the current year under the allowance method. Also, journalize the adjusting entry for uncollectible receivables assuming the company made $2,400,000 of credit sales during the year and, based on the industry average, the company expects uncollectible receivables to be 1.5% of credit sales. c. How much higher or lower would Morry Company's net income have been under the direct write-off method than under the allowance method?
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.
Morry Company wrote off the following
|
Customer
|
Amount
|
| J. Jackson |
$10,000
|
| L. Stanton |
9,500
|
| C. Barton |
13,100
|
| S. Fenton |
2,400
|
| Total |
$35,000
|
a. Journalize the write-offs for the current year under the direct write-off method. If an amount box does not require an entry, leave it blank.
b. Journalize the write-offs for the current year under the allowance method. Also, journalize the
c. How much higher or lower would Morry Company's net income have been under the direct write-off method than under the allowance method?
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