ACCT207 Chapter Notes - Chapter 8-9: Ddb Worldwide, Dont, Record Plant
Get access
Related Documents
Related Questions
The following selected transactions were taken from the recordsof Shipway Company for the first year of its operations endingDecember 31:
Apr. 13 | Wrote off account of Dean Sheppard, $5,190. | ||||||||||
May 15 | Received $2,600 as partial payment on the $6,900 account of DanPyle. Wrote off the remaining balance as uncollectible. | ||||||||||
July 27 | Received $5,190 from Dean Sheppard, whose account had beenwritten off on April 13. Reinstated the account and recorded thecash receipt. | ||||||||||
Dec. 31 | Wrote off the following accounts as uncollectible (record asone journal entry): | ||||||||||
| |||||||||||
Dec. 31 | If necessary, record the year-end adjusting entry for theuncollectible accounts. |
For those amount boxes in which no entry is required, leave thebox blank. If an entry is not required, select "No entry" from thedropdown box(es).
a. Journalize the transactions under the directwrite-off method.
Apr. 13 | Bad Debt Expense | ||
Accounts Receivable-DeanSheppard | |||
May 15 | Cash | ||
Bad Debt Expense | |||
Accounts Receivable-DanPyle | |||
July 27-reinstate | Accounts Receivable-DeanSheppard | ||
Bad Debt Expense | |||
July 27-collection | Cash | ||
Accounts Receivable-DeanSheppard | |||
Dec. 31-write-off | Bad Debt Expense | ||
Accounts Receivable-PaulChapman | |||
Accounts Receivable-DuaneDeRosa | |||
Accounts Receivable-TeresaGalloway | |||
Accounts Receivable-ErnieKlatt | |||
Accounts Receivable-MartyRichey | |||
Dec. 31-adjusting | No entry | ||
No entry |
b. Shipway Company uses the percent of creditsales method of estimating uncollectible accounts expense. Based onpast history and industry averages, 2% of credit sales are expectedto be uncollectible. Shipway Company recorded $1,266,500 of creditsales during the year.
Journalize the transactions under the allowance method.
Apr. 13 | Allowance for DoubtfulAccounts | ||
Accounts Receivable-DeanSheppard | |||
May 15 | Cash | ||
Allowance for DoubtfulAccounts | |||
Accounts Receivable-DanPyle | |||
July 27-reinstate | Accounts Receivable-DeanSheppard | ||
Allowance for DoubtfulAccounts | |||
July 27-collection | Cash | ||
Accounts Receivable-DeanSheppard | |||
Dec. 31-write-off | Allowance for DoubtfulAccounts | ||
Accounts Receivable-PaulChapman | |||
Accounts Receivable-DuaneDeRosa | |||
Accounts Receivable-TeresaGalloway | |||
Accounts Receivable-ErnieKlatt | |||
Accounts Receivable-MartyRichey | |||
Dec. 31-adjusting | Bad Debt Expense | ||
Allowance for DoubtfulAccounts |
Feedback
Remember that under the direct write-off method, Bad DebtExpense is not recorded until the customer's account is determinedto be worthless.
Under the allowance method once a customer account is identifiedas uncollectible, it is written off against the allowanceaccount.
Learning Objective 5.
c. How much higher (lower) would ShipwayCompany's net income have been under the direct write-off methodthan under the allowance method?