Chapter 8: Q3SE (page 466)

Applying the direct write-off method to account for uncollectibles
Shawna Valley is an attorney in Los Angeles. Valley uses the direct write-off method to account for uncollectible receivables.
At April 30, 2018, Valley’s accounts receivable totaled $19,000. During May, she earned revenue of $22,000 on account and collected $15,000 on account. She also wrote off uncollectible receivables of $1,100 on May 31, 2018.
Requirements
1. Use the direct write-off method to journalize Valley’s write-off of the uncollectible receivables.
2. What is Valley’s balance of Accounts Receivable at May 31, 2018?

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Step by step solution

Date	Account and explanation	Debit	Credit
2018
May	Accounts receivable- Valley’s Service Revenue (Services performed on account)	$ 22,000	$ 22,000
May	Cash Accounts receivable - Valley’s (Collected cash on account)	$ 15,000	$15,000
May 31	Bad debts Accounts receivable - Valley’s (Wrote off an uncollectible account.)	$1,100	$1,100

SUBSIDIARY ACCOUNTS

Accounts Receivable—Valley’s

Valley’s balance of Accounts Receivable at May 31, 2018 is $ 24,900

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	2018	2017
Net Credit Sales	\( 594,920	\)602,000
Net Receivables at end of year	38,500	47,100

2018
Apr.28	Performed service on account for Parkview Club, \(18,000.
Sep. 1	Received an \)18,000, 60-day, 12% note from Parkview Club in satisfaction of its past-due account receivable.
Oct. 31	Collected the Parkview Club note at maturity