Information on Hohenberger Company for 2017 follows:

Total credit sales...................................................................................$1000000

Accounts receivable at December 31..............................................................400000

Uncollectible accounts written off..................................................................17500

Amount collected on accounts previously written off (after write off but before year end) 2500

Instructions

(a) Assume that Hohenberger Company decides to estimate its uncollectible accounts using the allowance method and an aging schedule. Uncollectible accounts are estimated to be $24,000. What amount of bad debt expense will Hohenberger Company record if Allowance for Doubtful Accounts had an opening balance of $20,000 on January 1, 2017?

(b) Assume that Hohenberger Company decides to estimate its uncollectible accounts using the allowance method and estimates its bad debt expense at 2.25% of credit sales. What amount of bad debt expense will Hohenberger Company record if Allowance for Doubtful Accounts had an opening balance of $20,000 on January 1, 2017?

(c) Assume the same facts as in part (a) except that the Allowance for Doubtful Accounts had a $12,000 balance on January 1, 2017. What amount of bad debt expense will Hohenberger record on December 31, 2017?

(d) How does the amount of accounts written off during the period affect the amount of bad debt expense recorded at the end of the period when using the percentage of receivables approach?

(e) How does the collection of an account that had previously been written off affect the net realizable value of accounts receivable?

Taking It Further

Hohenberger would like to speed up the collection of accounts receivable balances. What are two ways a company could do this? What are the advantages and disadvantages of each?