Question

Applying the direct write-off method to account for uncollectibles

Shawna Valley is an attorney in Los Angeles. Valley uses the direct write-off method to account for uncollectible receivables.

At April 30, 2018, Valley’s accounts receivable totaled \(19,000. During May, she earned revenue of \)22,000 on account and collected \(15,000 on account. She also wrote off uncollectible receivables of \)1,100 on May 31, 2018.

Requirements

1. Use the direct write-off method to journalize Valley’s write-off of the uncollectible receivables.

2. What is Valley’s balance of Accounts Receivable at May 31, 2018?

Short answer

Date	Account and explanation	Debit	Credit
2018
May	Accounts receivable- Valley’s Service Revenue (Services performed on account)	$ 22,000	$ 22,000
May	Cash Accounts receivable - Valley’s (Collected cash on account)	$ 15,000	$15,000
May 31	Bad debts Accounts receivable - Valley’s (Wrote off an uncollectible account.)	$1,100	$1,100

Step-by-step solution

Requirement 1: Journalize the transactions for Summer consulting

Date	Account and explanation	Debit	Credit
2018
May	Accounts receivable- Valley’s Service Revenue (Services performed on account)	$ 22,000	$ 22,000
May	Cash Accounts receivable - Valley’s (Collected cash on account)	$ 15,000	$15,000
May 31	Bad debts Accounts receivable - Valley’s (Wrote off an uncollectible account.)	$1,100	$1,100

Requirement 2: Valley’s balance of Accounts Receivable

SUBSIDIARY ACCOUNTS

Accounts Receivable—Valley’s

Bal. $19,000
May $22,000	$15,000 May
	$1,100 May
Bal. $24,900

Valley’s balance of Accounts Receivable at May 31, 2018 is $ 24,900