Chapter 8, Problem 8.16E

Journalizing transactions using the direct write-off method

On June 1, High Performance Cell Phones sold $19,000 of merchandise to Andrew Trucking Company on account. Andrew fell on hard times and on July 15 paid only $7,000 of the account receivable. After repeated attempts to collect, High Performance finally wrote off its accounts receivable from Andrew on September 5. Six months later, March 5, High Performance received Andrew’s check for $12,000 with a note apologizing for the late payment.

Requirements

1. Journalize the transactions for High Performance Cell Phones using the direct write-off method. Ignore Cost of Goods Sold.

2. What are some limitations that High Performance will encounter when using the direct write-off method?