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Required information Exercise 5-138 Compare the allowance method and the direct write-off method (L05-6) [The following information applies to the questions displayed below) At the beginning of Year 1. a company has a balance of $24.000 in accounts receivable. Because the company 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 Year 1, the company wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that the company now will need to use the allowance method. The following transactions occur during Year 1 and Year 2 1. During Yeart install air conditioning systems on account, $170.000 2. During Year 1 collect $165 000 from customers on account 2. At the end of Year 1 estimate that uncollectible accounts total 10% of ending accounts receivable. 4 In Year 2. customers' accounts totaling $6,000 are written off as uncollectible Exercise 5-13B Part 1 Required: 1. Record each transaction using the allowance method. (If no entry is required for a particular transaction/event, select "No Journal Entry Required in the first account field) View transaction list View journal entry worksheet No Transaction General Journal Debit 1 Credit 1 Accounts Receivable Service Revenue 170,000 170,000 2 2 Cash Accounts Receivable 165,000 165,000 3 3 Bad Debt Expense Allowance for Uncollectible Accounts 4 4 Allowance for Uncollectible Accounts Accounts Receivable 6,000 6,000 3. Calculate bad debt expense for 2021 and 2022 under the allowance method and under the direct write-off method, prior to any adjusting entries in 2022 (Leave no cells blank.) Bad Debt Expense Year 1 Year 2 Allowance Method 24.000 Direct Write-off Method $ 6.000

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