Chapter 7, Problem 7.11E

(1)

To determine

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.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

To prepare: Journal entries to record the write-off of receivables, the collection of $1,200 for previously written off receivables, and the year-end adjusting entry for bad debts expense.

(2)

To determine

To describe: The manner in which accounts receivable would be shown in the 2016 year-end balance sheet.