Here is information related to Morgane Company for 2022. Total credit sales........................$1,500,000 Accounts receivable at December..........31 840,000

Question:

Here is information related to Morgane Company for 2022.

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

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

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

Instructions

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

b. Assume that Morgane Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. 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 Morgane record?

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

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...

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