Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount Kim Abel $24,300 Lee Drake 30,600 Jenny Green 29,900 Mike Lamb 17,900 Total $102,700 The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0–30 days $730,000 1% 31–60 days 290,000 2 61–90 days 114,000 15 91–120 days 70,000 30 More than 120 days 92,000 60 Total receivables $1,296,000 A. Journalize the write-offs under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. 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 $88,300 and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. C. How much higher (lower) would Seaforth International’s net income have been under the allowance method than under the direct write-off method? Chart of Accounts CHART OF ACCOUNTS Seaforth International General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Kim Abel 122 Accounts Receivable-Lee Drake 123 Accounts Receivable-Jenny Green 124 Accounts Receivable-Mike Lamb 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Store Equipment 523 Delivery Expen

Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount Kim Abel $24,300 Lee Drake 30,600 Jenny Green 29,900 Mike Lamb 17,900 Total $102,700 The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0–30 days $730,000 1% 31–60 days 290,000 2 61–90 days 114,000 15 91–120 days 70,000 30 More than 120 days 92,000 60 Total receivables $1,296,000 A. Journalize the write-offs under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. 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 $88,300 and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. C. How much higher (lower) would Seaforth International’s net income have been under the allowance method than under the direct write-off method? Chart of Accounts CHART OF ACCOUNTS Seaforth International General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Kim Abel 122 Accounts Receivable-Lee Drake 123 Accounts Receivable-Jenny Green 124 Accounts Receivable-Mike Lamb 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Store Equipment 523 Delivery Expen

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31:

Customer	Amount
Kim Abel	$24,300
Lee Drake	30,600
Jenny Green	29,900
Mike Lamb	17,900
Total	$102,700

The company prepared the following aging schedule for its accounts receivable on December 31:

Aging Class (Number of Days Past Due)	Receivables Balance on December 31	Estimated Percent of Uncollectible Accounts
0–30 days	$730,000	1%
31–60 days	290,000	2
61–90 days	114,000	15
91–120 days	70,000	30
More than 120 days	92,000	60
Total receivables	$1,296,000

A.	Journalize the write-offs under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
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 $88,300 and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
C.	How much higher (lower) would Seaforth International’s net income have been under the allowance method than under the direct write-off method?

Chart of Accounts

CHART OF ACCOUNTS

Seaforth International

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-Kim Abel
122	Accounts Receivable-Lee Drake
123	Accounts Receivable-Jenny Green
124	Accounts Receivable-Mike Lamb
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

Journal

A. On December 31, journalize the write-offs under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5

B. On December 31, journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $88,300 and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7

Final Question

C. How much higher (lower) would Seaforth International’s net income have been under the allowance method than under the direct write-off method?

Higher by

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