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What are the advantages of using the allowance method

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Question - At December 31, 2017, the trial balance of Mariette SA contained the following amounts before adjustment.

Debit Credit

Accounts Receivable €250,000

Allowance for Doubtful Accounts €1,900

Sales Revenue 600,000

Instructions -

(a) Prepare the adjusting entry at December 31, 2017, to record bad debt expense under each of the following independent assumptions.

1. An aging schedule indicates that €13,800 of accounts receivable will be uncollectible.

2. The company estimates that 2% of sales will be uncollectible.

(2) €12,000

(b) Repeat part (a) assuming that instead of a credit balance, there is a €1,900 debit balance in Allowance for Doubtful Accounts.

(c) During the next month, January 2018, a €3,000 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.

(d) Repeat part (c) assuming that Mariette uses the direct write-off method instead of the allowance method in accounting for uncollectible accounts receivable.

(e) What are the advantages of using the allowance method in accounting for uncollectible accounts as compared to the direct write-off method?

Reference no: EM132727530

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