Casebolt Company wrote off the following accounts receivable as uncollectible fo
ID: 2709949 • Letter: C
Question
Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2016:
Required:
A. On December 31, journalize the write-offs for 2016 under the direct write-off method. Refer to the Chart of Accounts for exact wording of account titles.
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B. On December 31, journalize the write-offs for 2016 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $5,148,000 of credit sales during 2016. Based on past history and industry averages, 0.70% of credit sales are expected to be uncollectible. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
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C. How much higher (lower) would Casebolt Company’s 2016 net income have been under the direct write-off method than under the allowance method?
by.
Customer Amount Shawn Brooke $4,629 Eve Denton 5,222 Art Malloy 11,001 Cassie Yost 9,145 Total $29,997Explanation / Answer
Answer:
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Casebolt Company’s 2016 net income Would be higher by $6,039 ($36,036-$29,997) under the direct write-off method than under the allowance method.
Direct write-off method Date Description Account No Debit Credit 31-Dec-16 By Bad debt Expenses 538 29997 To Accounts Receivable-Shawn Brooke 121 4629 To Accounts Receivable-Eve Denton 122 5222 To Accounts Receivable-Art Malloy 123 11001 To Accounts Receivable-Cassie Yost 124 9145