At the beginning of 2024, Best Heating & Air (BHA) has a balance of $25,400...
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At the beginning of 2024, Best Heating & Air (BHA) has a balance of $25,400 in accounts receivable. Because BHA is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of 2024, BHA wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that BHA now will need to use the allowance method. The following transactions occur during 2024 and 2025. During 2024, install air conditioning systems on account, $184,000. During 2024, collect $179,000 from customers on account. At the end of 2024, estimate that uncollectible accounts total 15% of ending accounts receivable. In 2025, customers accounts totaling $3,500 are written off as uncollectible. Required: 1. Record each transaction using the allowance method. 2. Record each transaction using the direct write-off method. 3. Calculate bad debt expense for 2024 and 2025 under the allowance method and under the direct write-off method, prior to any adjusting entries in 2025.
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