On june 1, 2018, top performance cell phones sold $ 26 comma 000 of merchandise to alright trucking company on account. alright fell on hard times and on july 15 paid only $ 7 comma 500 of the account receivable. after repeated attempts to collect, top performance finally wrote off its accounts receivable from alright on september 5. six months later, march 5, 2019, top performance received alright's check for $ 18 comma 500 with a note apologizing for the late payment.

requirements

1. journalize the transactions for high performance cell phoneshigh performance cell phones using the direct write-off method. ignore cost of goods sold.

2. what are some limitations that high performance will encounter when using the direct write-off method?

1.

June 1 2018

Dr Account Receivable      26,000

Cr Sales                              26,000

( to record sales on account to Alright trucking)

July 15 2018

Dr Cash                            7,500

Cr Account Receivable  7,500

( to record cash collection from Alright trucking)

Sep 5 2018

Dr Bad Debt Expenses         18,500

Cr Account Receivable        18,500

( to record bad debt expenses from Alright trucking's receivables)

March 5,2019

Dr Account Receivables       18,500

Cr Bad Debt Expenses        18,500

( to reverse the bad debt record of Alright trucking's receivables)

Dr Cash                                 18,500

Cr Account Receivable       18,500

( to record cash collection from Alright trucking)

2.

The limitations of direct written-off method is Bad Debt expenses is only recorded when it is incurred rather than when it is highly possible to be foreseen and estimated.

As a result, Account Receivables is tend to be recorded at the higher balance and Bad Debt expenses is recorded with the lack of timely manner ( that is, period after it is incurred) and thus does not match with the period the originating Sales is earned.

Explanation: