Question

Uncollectible Accounts, Using Direct Write-Off Method Illustrate the effects on the accounts and financial statements of the following transactions in the accounts of Valley Care & Supplies Co., a local hospital supply company that uses the direct write-off method of accounting for uncollectible receivables:

March 18. Recelived $29,000 on an account.
Balance Sheet
Statement of Cash Assets Liabilities + Stockholders' Equity
Flows
Mar. 18.
Statement of Cash Flows Income Statement
March 18. Wrote off the remaining $49,020 owed on account as uncollectible.
Balance Sheet
Statement of Cash Assets Liabilities + Stockholders' Equity
Flows
Mar. 18.
Statement of Cash Flows Income Statement

Answer 1

Answer and Explanation:

The effect of the given transaction is shown in the attachment below. Please find the attachment

As we know that

Accounting equation is

Total assets = Total liabilities + total stockholder equity

So,

1. In the first transaction there is an increased in assets by $29,000 and decreased the assets by $29,000 plus the same is to be recorded in the operating section of the cash flow statement

2. In the second transaction, there is decreased in asset for $49,020 also the retained earning is also decreased by same amount plus there is a bad debt expense also