Journalize the Following Transactions Using the Direct Write-Off Method of Accounting

question 112

Essay

Journalize the following transactions using the direct write-off method of accounting for uncollectible receivables.
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April 1 Sold merchandise on account to Jim Dobbs,$7,200.The cost of the merchandise is $5,400.
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June 10 Received payment for one-third of the receivable from Jim Dobbs and wrote off the remainder.
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Oct.11 Reinstated the account of Jim Dobbs and received cash in full payment.

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Definitions:

Moral Hazard

A situation where one party in a transaction has the opportunity to take risks because the costs that those risks entail will not be borne by that party.

Portfolio Risk

The variability of returns from a portfolio of investments.

Utility Function

A mathematical representation that ranks preferences or satisfaction levels individuals derive from consuming goods and services.

Risk Averse

The tendency of individuals or entities to prefer certainty over uncertainty, often choosing safer options over riskier ones to minimize potential losses.