1. Ace Plus is a home improvement store that began operations last year. On December 31st of the first year of operations, Ace Plus had accounts receivable totaling $50,000 and the store’s manager, Bill Henrickson, estimated that $1,500 of those receivables will not be collected. On January 17 of Year 2, Ace Plus decided to write off as uncollectible a $500 receivable owed by Roman Grant. Benny, the new accountant at Ace Plus, is struggling with receivables. Please advise him by answering the questions below. Assume Ace Plus uses the Allowance method for write-offs. 1. What should the December 31st journal entry look like? 2. What should the January 17th journal entry look like? 3. What type of account is Allowance for Doubtful Accounts and what type of balance does it have, debit or credit? 4. Briefly explain why a company might use the Direct Write-Off method instead of the Allowance method? Does it even make a difference?

Gadubhai

Hi I'm copying this question from my school text, the version of which you don't have on your site. I can't seem to get to the given answer....   Liang Company began operations in Year 1. During it's first two years, the company completed a number of transactions involveing sales on credit, accounts receivable collections and bad debts. These transactions are summarized as follows.   Year 1  a. Sold $1,345,434 of merchandise (that had costs $975,000) on credit, terms n/30. b. Wrote off $18,300 of uncollectivle accounts receivable c. Received $669,200 cash in payments of acccounts receivable. d. In adjusting the accounts on Decmeber 31, the company estimated that 1.5% of accounts receivable would be uncollectible. We are to prepare the journal entries to record Liang's Summariezed trasnsactions and its year end adjustments to record bad debts expenses. The company uses the perpectual inventory system and it applies the allowance method for it's accounts receiveable. Round to the nearest…

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