 |
|
| Browse | Ask | Answer | Search | Join/Login |
|
|
||||
|
Direct Write Off Methods
(a) What amount of bad debts expense will DeKalb Company report if it uses the direct writeoff method of accounting for bad debts?
Total credit sales $1,640,000 Accounts receivable at December 31 620,000 Bad debts written off 26,000 |
||||
|
||||
|
The direct write-off method is used on the date it is certain that the customer will not be able to pay (in the most extreme instance, bankruptcy). The entry is to debit bad debt expense and credit accounts receivable. The advantage of this method is that it is based on fact rather than estimates. However, it is not accepted for financial reporting purposes because it fails to match bad debt expense against sales in the year of sale and does not show the realizable value of accounts receivable. It is the only method allowed for tax purposes (except for small banks and specified types of financial organizations).
In your case, the write-offs reported would be the $26k. |
||||
| Question Tools | Search this Question |
Add your answer here.
Check out some similar questions!
If I am using the Direct Write-Off method with a balance of A/R - $160,000.00 and am writing off $2400.00. My question is does the company expect to collect the full amount. I know with the Allowance method they have a net receivable which is a/r minus allowable and then the net they expect to...
Please tell me if I'm answering the following question correct. On May 1, EZ Plumbing buys materials with a list price of $550. At the time of the purchase, EZ gives Halpin a check for $225 and asks Halpin to put the remainder of the purchase on its account, which already has a balance of $475. On...
Write -offs of uncollectible accounts receivable, $? Solve for the amount of write offs
When you're using he direct write off method, do you decrease the AR balance and net income?
View more questions Search
|
