Question

Dynamic, Incorporated had credit sales of $610,000 for March. Accounts receivable of $5,500 were determined to be worthless and were written off during March. Accounts receivable total $503,000 at March 31. Management feels that based on past experience, approximately 4% of net credit sales will prove to be uncollectible. Assuming Dynamic, Incorporated uses the direct write-off method of accounting for uncollectible accounts, uncollectible accounts expense for March is

Answer 1

The uncollectible accounts expense for Dynamic, Incorporated for March using the direct write-off method is $5,500, reflecting the actual accounts receivable deemed worthless and written off.

Step-by-step explanation:

The question asks about the calculation of uncollectible accounts expense for March using the direct write-off method of accounting for Dynamic, Incorporated. Since the company had credit sales of $610,000 for March and it was determined that accounts receivable of $5,500 were worthless and were written off, the uncollectible accounts expense for March would be $5,500.

This is because under the direct write-off method, expenses are recognized only when debts are specifically deemed uncollectible and directly written off. The company's estimate that 4% of net credit sales will prove to be uncollectible is not accounted for in the direct write-off method. It would be used under the allowance method, which is not applicable in this scenario.