Here is information related to Younger Company for 2010.

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

Accounts receivable at December 31 ...... 700,000

Bad debts written off ................................... 26,000

Instructions

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

(b) Assume that Younger 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 $4,000?

(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 Younger record?

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