Brady is hired in 2018 to be the accountant for Anderson Manufacturing, a privat
ID: 2511723 • Letter: B
Question
Brady is hired in 2018 to be the accountant for Anderson Manufacturing, a private company. At the end of 2018, the balance of Accounts Receivable is $27,000. In the past, Anderson has used only the direct write-off method to account for bad debts. Based on a detailed analysis of amounts owed, Brady believes the best estimate of future bad debts is $8,600. 1. If Anderson continues to use the direct write-off method to account for uncollectible accounts, what adjustment, if any, would Brady record at the end of 2018?
Explanation / Answer
There wouldn't be any adjusting entry in 2018 under direct write - off method. Under this method bad debt expense would be recorded at the time when the account is written off by debiting Bad debt Expenses and Crediting Accounts Receivable.