Chapter 7, Problem 7.10E

(1)

To determine

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for bad debt account.

To Compute: The bad debts expense of 2016.

(2)

To determine

To compute: The amount of bad debts written-off during 2016.

(3)

To determine

To compute: The amount of bad debts expenses for 2016 if the company uses the direct write off method.