On August 31, 2012, Daisy Floral Supply had a $155,000 debit balance in Accounts receivable and a $6,200 credit balance in Allowance for uncollectible accounts. During September, Daisy made
sales on account, $590,000.
collections on account, $627,000.
write-offs of uncollectible receivables, $7,000.
- Journalize all September entries using the allowance method. Uncollectible account expense was estimated at 3% of credit sales. Show all September activity in Accounts receivable, Allowance for uncollectible accounts, and Uncollectible account expense (post to these T-accounts).
- Using the same facts, assume instead that Daisy used the direct write-off method to account for uncollectible receivables. Journalize all September entries using the direct write-off method. Post to Accounts receivable and Uncollectible account expense and show their balances at September 30, 2012.
- What amount of uncollectible account expense would Daisy report on its September income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason.
- What amount of net accounts receivable would Daisy report on its September 30, 2012 balance sheet under each of the two methods? Which amount is more realistic? Give your reason.