Reference no: EM132732135

Question - Davis Corporation uses the allowance method to estimate and record bad debt expense and has an accounts receivable balance of $60,000 and an allowance for uncollectible accounts credit balance of $4,200. Suppose an account receivable of $525 from one customer is determined to be uncollectible and is written off.

a) What is the entry to record the write off of the uncollectible account?

b) If all of the facts were the same except that Davis Corporation used the direct write-off method and therefore has no allowance for uncollectible account, what entry would be necessary to record the uncollectible account write off?

c) Why is the direct write-off method unacceptable in terms of generally accepted accounting principles (GAAP)?