Star Beer Inc.'s experience indicates that Star will fail to collect 3% of net credit sales, which totaled $100,000 during the three-month period January to March of 2011. During this period, Star wrote off $4,000 of its accounts receivable as uncollectible. Required: 1. Record Star's uncollectible-account expense for January to March under: i. The allowance method. ii. The direct write-off method. 2. Explain what is bad debt and how it works in the accounting world? 3. Which method of accounting for uncollectible is preferred? What makes this method better?
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Astoria Computer Systems, Inc., manufactures printers. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $100,000 during the month. Work-in-process records revealed that 4,000 cards were started in January, 2,000 cards were complete, and 1,500 units were spoiled as expected. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.
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