Accounting for uncollectible accounts using the allowance and direct write-off methods, and reporting receivables on the balance sheet
On October 31, 2012, Blossom Floral Supply had a $180,000 debit balance in Accounts receivable and a $7,200 credit balance in Allowance for uncollectible accounts. During November, Blossom made
- sales on account, $560,000.
- collections on account, $598,000.
- write-offs of uncollectible receivables, $9,000.
Requirements
1. Journalize all November entries using the allowance method. Uncollectible account expense was estimated at 1% of credit sales. Show all November 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 November entries using the direct write-off method. Post to Accounts receivable and Uncollectible account expense and show their balances at November 30, 2012.
3. What amount of uncollectible account expense would Blossom report on its November 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 November 30, 2012 balance sheet under each of the two methods? Which amount is more realistic? Give your reason.