Chapter 8, Problem 8.2APE

(a)

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.

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Write-off:

Write-off refers to deduction of a certain amount from accounts receivable, when it becomes uncollectible.

To journalize: The collection of $1,200 cash and write-off of Person M’s $4,000 of remaining uncollectible accounts, using allowance method.

(b)

To determine

To reinstate: The account of Person M and record the collection of cash on account.