Here is information for Zorba Ltd. for the year ended April 30, 2012:

Total credit sales.............................................................................$2,000,000

Accounts receivable at April 30...............................................................800,000

Accounts receivable written off during year..................................................35,000

Accounts receivable later recovered (after write-off but before year end).................5,000

At the end of the year, uncollectible accounts were estimated to total $60,000 based on an aging schedule.

Instructions

(a) What amount of bad debts expense will Zorba record if Allowance for Doubtful Accounts has an opening credit balance of $20,000 on May 1, 2011?

(b) Assume the same facts as in (a) except that there is a $40,000 opening credit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Zorba record?

(c) What are the advantages of using the allowance method of reporting bad debts expense?