Complete all the requirements of M8-3, except assume that Extreme Fitness uses the direct write-off method. Note that this means Extreme does not have an Allowance for Doubtful Accounts balance.

M8-3

a. Show how the company would have reported its receivable accounts on December 31, 2014. As of that date, what amount did Extreme Fitness expect to collect?

b. Prepare the journal entry to write off the accounts on January 2, 2015.

c. Assuming no other transactions occurred between December 31, 2014, and January 3, 2015, show how Extreme Fitness would have reported its receivable accounts on January 3, 2015. As of that date, what amount did Extreme Fitness expect to collect? Has this changed from December 31, 2014? Explain why or why not.