direct write off and allowance methods matching approach the december 31 20×2 year e 502427

Direct write-off and allowance methods: matching approach. The December 31, 20X2, year-end trial balance of Targa Company revealed the following account information:

Debits

Credits

Accounts Receivable

$252,000

Allowance for Uncollectible Accounts

$ 3,000

Sales

855,000

Instructions

a. Determine the adjusting entry for bad debts under each of the following conditions:

(1) An aging schedule indicates that $12,420 of accounts receivable will be uncollectible.

(2) Uncollectible accounts are estimated at 2% of net sales.

b. On January 19, 20X3, Targa learned that House Company, a customer, had declared bankruptcy. Present the proper entry to write off House’s $950 balance using the allowance method.

c. Repeat the requirement in part (b), using the direct write-off method.

d. In light of the House bankruptcy, examine the allowance and direct write-off methods in terms of their ability to properly match revenues and expenses.