Question

Brady is hired in 2018 to be the accountant for anderson manufacturing, a private company. at the end of 2018, the balance of accounts receivable is $24,500. in the past, anderson has used only the direct write-off method to account for bad debts. based on a detailed analysis of amounts owed, brady believes the best estimate of future bad debts is $8,100. 1. if anderson continues to use the direct write-off method to account for uncollectible accounts, what adjustment, what adjustment, if any, would brady record if anderson instead uses the allowance method to account for uncollectible accounts?

Answer 1

Brady doesn't have to make any adjusting entries since before Anderson Manufacturing used the direct write off method for bad debt.

Any prior bad debt expense should have been already recorded (at the moment the account was written off), there should be no bad debt allowance.