Question

E8-15A

Allowance Method versus Direct Write-Off Method On March 10, Gardner, Inc., declared a $700 account receivable from the Gates Company as uncollectible and wrote off the account. On November 18, Gardner received a $200 payment on the account from Gates.

a. Assume that Gardner uses the allowance method of handling credit losses. Prepare the journal entries to record the write-off and the subsequent recovery of Gate's account.

b. Assume that Gardner uses the direct write-off method ofhandling credit losses. Prepare the journal entries to record the write-off and the subsequent recovery of Gate's account.

c. Assume that the payment from Gates arrives on February 5 of the following year rather than on November 18 of the current year. (1) Prepare the journal entries to record the write-off and the subsequent recovery of Gates's account under the allowance method. (2) Prepare the journal entries to record the write-off and subsequent recovery of Gates's account under the direct write-off method.