ACC 205 Week 2 Exercise 9 Direct write-off and allowance methods matching approach

ACC 205 Week 2 Exercise 9 Direct write-off and allowance methods matching approach

Direct write-off and allowance methods: matching approach. The December 31, 20X2, year-end trial balance of Targa Company revealed the following account information:

Debits Credits
Accounts Receivable $252,000
Allowance for Uncollectible Accounts $ 3,000
Sales 855,000

Instructions

  1. Determine the adjusting entry for bad debts under each of the following condi­tions:

(1) An aging schedule indicates that $12,420 of accounts receivable will be uncollectible.

(2) Uncollectible accounts are estimated at 2% of net sales.

  1. On January 19, 20X3, Targa learned that House Company, a customer, had declared bankruptcy. Present the proper entry to write off House’s $950 balance using the allowance method.
  2. Repeat the requirement in part (b), using the direct write-off method.
  3. In light of the House bankruptcy, examine the allowance and direct write-off methods in terms of their ability to properly match revenues and expenses.

 

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