Appearing next is information pertaining to Garrels Company's Allowance for doubtful accounts. Examine this information and answer the following questions.
2011 2010 2009
Allowance for doubtful accounts
Balance, beginning of year ? ? 1324
Provision charged to expense ? 502 1349
Write-offs, less recoveries 1 622 ?
Balance, end of year 1453 ? 1302
1. Solve for the unknowns in the preceding schedule.
2. Make all entries related to the Allowance for doubtful accounts account for 2009-2011.
3. Make all entries for bad debts for 2009-2011 assuming that Garrels did not accrue for estimated bad debt losses but instead recorded bad debt expense one receivables were determined to be uncollectible. (This is called the direct write-off method.)
4. why does GAAP require the allowance method over the direct write-off method?
5. Calculate the cumulative difference in reported pre-tax income under the allowance and direct write-off methods over the 2009-2011 period.
Your tutorial is attached (in Excel) showing the two methods and how to solve for the missing pieces. Click in cells to see computations.