Here is information related to Freeman Company for 2014.

Total credit sales................................... $1,500,000

Accounts receivable at December 31...... 840,000

Bad debts written off.................................. 37,000

Instructions

(a) What amount of bad debt expense will Freeman Company report if it uses the direct write-off method of accounting for bad debts?

(b) Assume that Freeman Company decides to estimate its bad debt expense based on 4% of accounts receivable. What amount of bad debt expense will the company record if Allowance for Doubtful Accounts has a credit balance of $3,000?

(c) Assume the same facts as in part (b), except that there is a $1,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debt expense will Freeman record?

(d) What is a weakness of the direct write-off method of reporting bad debt expense?