Writing Here is information related to Morgane Company for 2025.

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?

Transcribed Image Text:

Total credit sales Accounts receivable at December 31 Bad debts written off $1,500,000 840,000 37,000