80.2K

Verified Solution

Link Copied!

Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31:

Customer	Amount
Kim Abel	$ 21,550
Lee Drake	33,925
Jenny Green	27,565
Mike Lamb	19,460
Total	$102,500

The company prepared the following aging schedule for its accounts receivable on December 31:

Aging Class (Number of Days Past Due)	Receivables Balance on December 31	Estimated Percent of Uncollectible Accounts
030 days	$ 715,000	1%
3160 days	310,000	2
6190 days	102,000	15
91120 days	76,000	30
More than 120 days	97,000	60
Total receivables	$1,300,000

A.	Journalize the write-offs under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
B.	Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $95,000 and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
C.	How much higher (lower) would Seaforth Internationals net income have been under the allowance method than under the direct write-off method? CHART OF ACCOUNTS Seaforth International General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Kim Abel 122 Accounts Receivable-Lee Drake 123 Accounts Receivable-Jenny Green 124 Accounts Receivable-Mike Lamb 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary A. On December 31, journalize the write-offs under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 B. On December 31, journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of $95,000 and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 6 7 C. How much higher (lower) would Seaforth Internationals net income have been under the allowance method than under the direct write-off method? by REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Store Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense

Answer & Explanation Solved by verified expert

See Answer