Answer:
(a) Based on the information given, which method of accounting for bad debts is Skysong Company using-the direct write-off method or the allowance method?
- allowance method since allowance account has a $1,200 credit balance
(b) Prepare the adjusting entry at December 31, 2019, for bad debt expense, assuming an aging schedule indicates that $10,900 of accounts receivable will be uncollectible.
- Dr bad debt expense 9,700
- Cr Allowance for doubtful accounts 9,700
bad debt expense = $10,900 - $1,200 = $9,700
(c) Repeat part (b) assuming that instead of a credit balance there is an $1,200 debit balance in Allowance for Doubtful Accounts.
- Dr bad debt expense 12,100
- Cr Allowance for doubtful accounts 12,100
bad debt expense = $10,900 + $1,200 = $12,100
(d) During the next month, January 2020, a $2,800 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.
- Dr Allowance for doubtful accounts 2,800
- Cr Accounts receivable 2,800
(e Repeat part (d) assuming that Skysong uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.
- Dr Bad debt expense 2,800
- Cr Accounts receivable 2,800
When you use the direct write off method, bad debt is debited against accounts receivable directly.
