Problem
On August 31, 2011, BlossomBlossom Floral Supply had a $140,000 debit balance in Accounts receivable and a $5,600 credit balance in Allowance for uncollectible accounts. During SeptemberSeptember, BlossomBlossom made
times• Sales on account, $530,000
times• Collections on account, $573,000
times• Write-offs of uncollectible receivables, $7,000
Requirements
1. Journalize all September entries using the allowance method. Uncollectible-account expense was estimated at 2% of credit sales. Show all September activity in Accounts receivable, Allowance for uncollectible accounts, and Uncollectible-account expense(post to these T-accounts).
2. Using the same facts, assume instead that Blossom used the direct write-off method to account for uncollectible receivables. Journalize all September entries using the direct write-off method. Post to Accounts receivable and Uncollectible-account expense and show their balances at September 30, 2011.
3. What amount of uncollectible-account expense would Blossom report on its September income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason.
4. What amount of net accounts receivable would Blossom report on its September 30,2011, balance sheet under each of the two methods? Which amount is more realistic?