Chapter 9, Problem E9.20E

To determine

Direct Write-Off Method:

The accounting method for uncollectible receivables which do not anticipate any bad expense by creating provision for bad debt at the period of sale is called Direct Write-Off Method. Under this method, the bad debts are written off directly when the business determines a particular customer as uncollectible.

Allowance method:

Under allowance method, an allowance for bad debts is created with estimation before the bad debts actually become uncollectible. Allowance method aims at accounting for the bad debts during same period in which the sale occurred.

To determine:

1.

Journalize the transactions of Ritter during 2016 using direct write-off method.

2.

Journalize the transactions of Ritter during 2016 using allowance method.