At December 31 2010 the trial balance of Worcester

Company
At December 31, 2010, the trial balance of Worcester Company contained the following
amounts before adjustment.Instructions(a) Based on the information given, which method of
accounting for bad debts is Worcester Company using—the direct write-off method or the
allowance method? How can you tell?(b) Prepare the adjusting entry at December 31, 2010, for
bad debts expense under each of the following independent assumptions.(1) An aging schedule
indicates that $11,750 of accounts receivable will be uncollectible.(2) The company estimates
that 1% of sales will be uncollectible.(c) Repeat part (b) assuming that instead of a credit
balance there is an $2,000 debit balance in Allowance for Doubtful Accounts.(d) During the next
month, January 2011, a $3,000 account receivable is written off as uncollectible. Prepare the
journal entry to record the write-off.(e) Repeat part (d) assuming that Worcester uses the direct
write-off method instead of the allowance method in accounting for uncollectible accounts
receivable.(f) What type of account is Allowance for Doubtful Accounts? How does it affect how
accounts receivable is reported on the balance sheet at the end of the accountingperiod?
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At December 31 2010 the trial balance of Worcester Company
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