At December 31, 2019, the trial balance of Skysong Company contained the following amounts before adjustment Debit Credit Accounts Receivable Allowance for Doubtful Accounts Sales Revenue $394,000 1,200 901,000 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? (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. (c) Repeat part (b) assuming that instead of a credit balance there is an $1,200 debit balance in Allowance for Doubtful Accounts. (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. (e Repeat part (d) assuming that Skysong uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.

Question

Fiona Black

Business

31 October, 21:10

At December 31, 2019, the trial balance of Skysong Company contained the following amounts before adjustment Debit Credit Accounts Receivable Allowance for Doubtful Accounts Sales Revenue $394,000 1,200 901,000 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? (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. (c) Repeat part (b) assuming that instead of a credit balance there is an $1,200 debit balance in Allowance for Doubtful Accounts. (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. (e Repeat part (d) assuming that Skysong uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.

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Zoe Dyer · Answer 1

(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.