The allowance method uses allowance for a doubtful account for write-offs. Under this, bad debt written off is recognized only when a specific account is determined to be uncollectable. Whereas the allowance method of accounting for bad debts estimates loss from uncollectible because when sales occur, sellers do not know which customer will not pay their bills. The year-end adjustment entry to record bad debts assuming allowance for a doubtful account has an unadjusted balance of $415 credit.

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Chapter 7, Problem 13E

a.

To determine

Concept Introduction: The allowance method uses allowance for a doubtful account for write-offs. Under this, bad debt written off is recognized only when a specific account is determined to be uncollectable. Whereas the allowance method of accounting for bad debts estimates loss from uncollectible because when sales occur, sellers do not know which customer will not pay their bills.

The year-end adjustment entry to record bad debts assuming allowance for a doubtful account has an unadjusted balance of $415 credit.

b.

To determine

Concept Introduction: The allowance method uses allowance for a doubtful account for write-offs. Under this, bad debt written off is recognized only when a specific account is determined to be uncollectable. Whereas the allowance method of accounting for bad debts estimates loss from uncollectible because when sales occur, sellers do not know which customer will not pay their bills.

The year-end adjustment entry to record bad debts assuming allowance for doubtful account has unadjusted balance of $291 debit.

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