Question

Castle Company provides estimates for its uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $17,280 at the beginning of 2018 and a $22,410 credit balance at the end of 2018 (after adjusting entries). If the direct write-off method had been used to account for uncollectible accounts (bad debt expense equals actual write-offs), the income statement for 2018 would have included bad debt expense of $17,100 and revenue of $2,200 from the collection of previously written off bad debts. Required: Determine bad debt expense for 2018 according to the allowance method.

Answer 1

Determine bad debt expense for 2018 according to the allowance method.

Allowance method____________________5130

Step-by-step explanation:

direct write-off method definition. A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined to be uncollectible.

If the income statement for 2018 would have included bad debt expense of $17,100 and revenue of $2,200 from the collection of previously written off bad debts.

Bad debt expense____________ 17100

Revenue__________________________-2200

Net ______________________________14900

The differrenece betwen begining and the end of allowance method is

Begining Allowance for uncollectible_____17280

At the end Allowance for uncollectible__22410

Difference __________________-5130

Bad debt expense____________ 17100

Revenue__________________________-2200

Net ______________________________14900

Allowance method____________________5130