Quantum Technologies, a computer consulting firm, has decided to write off the $13,000 balance of an account owed by a customer. Illustrate the effects on the accounts and financial statements to record the write-off (a) assuming that the direct write-off method is used (b) assuming that the allowance method is used

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Darshita 6.14K August 13, 2020 0 Comments

Quantum Technologies, a computer consulting firm, has decided to write off the $13,000 balance of an account owed by a customer. Illustrate the effects on the accounts and financial statements to record the write-off

(a) assuming that the direct write-off method is used

(b) assuming that the allowance method is used

Darshita Changed status to publish August 13, 2020

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score 0 · Answer 1 · 2020-08-13T15:10:14+00:00

Answer:

Direct write off:

Statement of Cash Flows	Balance Sheet
	Assets			Liabilities	+	Stockholders’ Equity
	Accounts Receivable	+	No effect	No effect	+		Retained Earnings
	-17375						-$17,375
Statement of Cash Flows							Income Statement
No Effect							Bad Debt expense	17375

Solution b: Allowance method:

Statement of Cash Flows	Balance Sheet
	Assets			Liabilities	+	Stockholders’ Equity
	Accounts Receivable	–	Allowance for Doubtful Account	No effect	+		No effect
	-17375		-17375
Statement of Cash Flows							Income Statement
No Effect							No effect

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