Morry Company Wrote Off the Following Accounts Receivable as Uncollectible $\$ 2,400,000$

question 105

Essay

Morry Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31:
​ Required: (a) Journalize the write-offs for the current year under the direct write-off method.
(b) Journalize the write-offs for the current year under the allowance method. Also, joumalize the adjusting entry for uncollectible receivables assuming the company made $\$ 2,400,000$ of credit sales during the year and the industry average for uncollectible receivables is $1.50 \%$ of credit sales.
(c) How much higher or lower would Morry Company's net income have been under the direct write-off method than under the allowance method?

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Definitions:

Consideration

Something of value exchanged between parties in a contract, which is required for the agreement to be legally binding.

Estopped

Barred, impeded, or precluded.

Promissory Estoppel

A legal principle that prevents a party from withdrawing a promise when the other party has relied upon it to their detriment.

Preexisting Duty

An obligation or duty that already exists under contract law and does not constitute valid consideration for a new agreement.