For a Business That Uses the Allowance Method of Accounting

question 121

Essay

For a business that uses the allowance method of accounting for uncollectible receivables:
(a)Journalize the entries to record the following:
(1)Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000.
(2)In March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.
(3)In November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
(4)In December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.
(b)Redo the entries in steps (2), (3), and (4) assuming the company uses the direct write-off method.

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Definitions:

Sensory Memory

The shortest-term element of memory that allows individuals to retain impressions of sensory information after the original stimuli have ended.

Display

The visual presentation of information, data, or images, usually on a screen or through a physical setup, intended to convey messages or facilitate interaction.

Specific Tone

A particular sound or quality of voice that conveys a distinct emotion, attitude, or intention.

Active System

A system that engages in actions or activities that produce changes or results, typically referring to mechanisms or processes that require energy input to operate.