Question

On June ​1, High Performance Cell Phones sold 19,000 of merchandise to Anthony Trucking Company on account. Anthony fell on hard times and on July15 paid only $ 5,000 of the account receivable. After repeated attempts to​ collect, High Performance finally wrote off its accounts receivable from Anthony on September 5. Six months​ later, March ​5, High Performance received Anthony's check for $ 14,000 with a note apologizing for the late payment.

REQUIREMENTS

1. Journalize the transactions for High Performance Cell PhonesHigh Performance Cell Phones using the direct​ write-off method. Ignore Cost of Goods Sold.

2. What are some limitations that High Performance will encounter when using the direct​ write-off method?

Answer 1

Answer and Explanation:

The Journal entries are shown below:-

1. Anthony Trucking Dr, $19,000

To Sales A/c $19,000

(Being the sales made is recorded)

2. Bank Dr, $5,000

To Anthony Trucking $5,000

(Being cash received is recorded)

3. Wrote off A/c Dr, $14,000

To Anthony Trucking $14,000

(Being Account receivable write off the balance is recorded)

4. Bank Dr, $14,000

To Wrote off $14,000

(Being cash received is recorded)

2. High Performance 's direct write-off approach would face drawbacks because it breaches the matching principle. The matching theory involves be matching the spending of uncollectible accounts with the relevant revenues. Here uncollectible amount is treated as a bad debt expense. The written off amount is treated as uncollectible amount by the customer