Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 8

Entries for bad debt expense under the direct write-off and allowance methods
Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31:

The company prepared the following aging schedule for its accounts receivable on December 31:

a. Journalize the write-offs under the direct write-off method.
b. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning credit balance of $95,000 on January 1 and the company uses the analysis of receivables method.
c. How much higher (lower) would Seaforth International's net income have been under the allowance method than under the direct write-off method