Question

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?



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  • CreatedApril 07, 2014
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