The following selected transactions were taken from the records of rustic tables company for the year ending december 31, 2016:
june 8. wrote off account of kathy quantel, $8,440.
aug. 14. received $3,000 as partial payment on the $12,500 account of rosalie oakes. wrote off the remaining balance as uncollectible.
oct. 16. received the $8,440 from kathy quantel, whose account had been written off on june 8. reinstated the account and recorded the cash receipt.
dec. 31 wrote off the following accounts as uncollectible (record as one journal entry):
wade dolan $4,600
greg gagne 3,600
amber kisko 7,150
shannon poole 2,975
niki spence 6,630
dec. 31. if necessary, record the year-end adjusting entry for uncollectible accounts.
rustic tables company prepared the following aging schedule for its accounts receivable:
aging class (number of days past due) receivables balance on december 31 estimated percent of uncollectible accounts
0–30 days $320,000 1%
31–60 days 110,000 3
61–90 days 24,000 10
91–120 days 18,000 33
more than 120 days 43,000 75
total receivables $515,000
required:
a. journalize the transactions for 2016 under the direct write-off method. if no entry is required, simply skip to the next transaction.
b. journalize the transactions for 2016 under the allowance method, assuming that the allowance account had a beginning balance of $36,000 on january 1, 2016, and the company uses the analysis of receivables method. if no entry is required, simply skip to the next transaction.
c. how much higher (lower) would rustic tables 2016 net income have been under the direct write-off method than under the allowance method?