Question

Writing off accounts receivable E6-6 Quantum Technologies, a computer consulting firm, has decided to write off the $13,000 balance of an account owed by a customer. Illustrate the effects on the accounts and finan- cial statements to record the write-off (a) assuming that the direct write-off method is used, and (b) assuming that the allowance method is used. Estimating doubtful accounts E6-7 Easy Rider International is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31, 20Y3, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows: Age Interval Balance Percent Uncollectible Not past due 1-30 days past due 31-60 days past due 61-90 days past due 91-180 days past due Over 180 days past due $1,850,000 1% 750,000 2 100,000 6 60,000 14 45,000 60 25,000 $2,830,000 Estimate what the balance of Allowance for Doubtful Accounts should be as of Decem 90 ber 31, 20Y3

Answer 1

6) Writing off : Direct method

	Assets		=	Liabilities		+	Stockholder's equity
Writing off	Account receivable	-13000					Bad debt expense	-13000

6) Writing off : Allowance method

	Assets		=	Liabilities		+	Stockholder's equity
Writing off	Account receivable	-13000
	Allowance for doubtful accounts	-13000

7) Estimated the balance of allowance for doubtful accounts

Age interval	Balance	% Uncollectible	$ Uncollectible
Not past due	1850000	1%	18500
1-30 days past due	750000	2%	15000
31-60 days past due	100000	6%	6000
61-90 days past due	60000	14%	8400
91-180 days past due	45000	60%	27000
Over 180 days past due	25000	90%	22500
	2830000		97400

Balance of allowance for doubtful accounts as on December 31,20Y3 = $97400