Writing Information related to Mingenback Company for 2020 is summarized below.
Total credit sales $2,500,000
Accounts receivable at December 31 875,000
Bad debts written off 33,000
Instructions
a. What amount of bad debt expense will Mingenback Company report if it uses the direct write-off
method of accounting for bad debts?
b. Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful
Accounts credit balance of $3,000?
c. Assume the same facts as in (b), except that there is a $3,000 debit balance in Allowance for Doubtful
Accounts. What amount of bad debt expense will Mingenback record?
d. What is the weakness of the direct write-off method of reporting bad debt expense?