EX 8-18 Entries for bad debt expense under the direct write-off and allowance methods

Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31, 2014:

Customer	Amount
Kim Abel	$ 21,550
Lee Drake	33,925
Jenny Green	27,565
Mike Lamb	19,460
Total	$102,500

The company prepared the following aging schedule for its accounts receivable on December 31, 2014:

Aging Class (Number	Receivables Balance	Estimated Percent of
of Days Past Due)	on December 31	Uncollectible Accounts
0–30 days	$ 715,000	1%
31–60 days	310,000	2
61–90 days	102,000	15
91–120 days	76,000	30
More than 120 days	97,000	60
Total receivables	$1,300,000

a. Journalize the write-offs for 2014 under the direct write-off method.

b. Journalize the write-offs and the year-end adjusting entry for 2014 under the allowance method, assuming that the allowance account had a beginning balance of $95,000 on January 1, 2014, and the company uses the analysis of receivables method.

c. How much higher (lower) would Seaforth International’s 2014 net income have been under the allowance method than under the direct write-off method?