Chapter5 Feb 21

School: Purdue University - Course: MGMT 2000 - Subject: Accounting

Exercise 5-13 (LO 5-6) Requirement 1 1.DebitCredit Accounts Receivable190,000 Service Revenue190,000 (Provide service on account) 2. Cash185,000 Accounts Receivable185,000 (Collect cash on account) 3. Bad Debt Expense4,650 Allowance for Uncollectible Accounts4,650 (Estimate future bad debts) ($4,650 = $31,000 x 15%) 4. Allowance for Uncollectible Accounts3,000 Accounts Receivable3,000 (Write off actual bad debts) Requirement 2 1.DebitCredit Accounts Receivable190,000 Service Revenue190,000 (Provide services on account) 2. Cash185,000 Accounts Receivable185,000 (Collect cash on account) 3. No entry 4. Bad Debt Expense3,000 Accounts Receivable3,000 (Write off actual bad debts)
Exercise 5-13 (concluded) Requirement 3 Bad Debt ExpenseAllowanceMethodDirect Write-of Method 2024:$4,650$0 2025:$0$3,000 Under the allowance method, we record bad debt expense in the period we estimate the bad debts (2024). In 2024, $4,650 would be recorded for bad debt expense under the allowance method only. Under the direct write-of method, we record bad debts when they actually occur (2025). In 2025, $3,000 would be recorded for bad debt expense under the direct write-of method only. The diference in expense amounts between years relates to the fact that bad debtestimatesin 2024 did not prove to be theactualamount occurring in 2025

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