Here is information related to Vansen Company for 2012.

Total credit sales $2,000,000

Accounts receivable at December 31 400,000

Bad debts written off 15,000

Instructions

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

(b) Assume that Vansen Company decides to estimate its bad debts expense based on 4% of accounts receivable. What amount of bad debts expense will the company record if it has an Allowance for Doubtful Accounts credit balance of $3,700?

(c) Assume the same facts as in part (b), except that there is a $2,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Vansen record?

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