Financial Accounting
P8-2A
Information related to Mingnback Company for 2015 is summarized below.
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Order Paper NowTotal credit sales $2,500,000
Accounts receivable at Dec 31 875,000
Bad debts written off 33,000
Instructions:
a) What amount of bad debt expense will Mingenback Company report if it uses the direct write-off method of accounting for bad debts?
b) Assume that Mingenback Company estimates its bad debt expense to be 2% of credit sales. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $4,000?
c) Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $3,000.
d) Assume the same facts as in © , except that there is a a$3,000, debit balance in Allowance for Doubtful Accounts. What amount of bad debt expense will Mingenback record?
e) What is the weakness of the direct write-off method of reporting bad debt expense?
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