Information related to Mingenback Company for 2019 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 (c), 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?