Chapter 9, Problem 9.4BE

(a)

To determine

Allowance method:

Allowance method can be defined as the method to write off bad debts expense. Under this method, the firm does not wait for the time when bad debts would occur. It predicts the bad debts prior to its occurrence. It can be referred to as an estimation of additional funds received from sales transactions or other source that is kept aside to be paid off for bad debt when bad debt occurs.

To prepare: The journal entry to record the write-off.

(b)

To determine

The cash realizable value of the accounts receivable before and after the write-off.