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How much higher would Spangler Company net income

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Problem - Entries for bad debt expense under the direct write-off and allowance methods - Spangler Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31, 2012:

Customer Amount

Will Boyette $10,000

Stan Frey 8,000

Tammy Imes 5,000

Shana Wagner 6,000

Total $29,000

a. Journalize the write-offs for 2012 under the direct write-off method.

b. Journalize the write-offs for 2012 under the allowance method. Also, journalize the adjusting entry for uncollectible accounts. The company recorded $3,000,000 of credit sales during 2012. Based on past history and industry averages, 1 1⁄2% of credit sales are expected to be uncollectible.

c. How much higher (lower) would Spangler Company's 2012 net income have been under the direct write-off method than under the allowance method?

Reference no: EM132877294

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