Here is information related to Volkov Company for 1998:

\section*{Instructions}

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

(b) Assume that Volkov Company decides to estimate its bad debts expense based on 5\% of accounts receivable. What amount of bad debts expense will Volkov Company record if it has an Allowance for Doubtful Accounts credit balance of \(\$ 3,000\) ?

(c) Assume the same facts as in part (b), except that there is a \(\$ 3,000\) debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Volkov record?

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

Transcribed Image Text:

Total credit sales Accounts receivable at December 31 Bad debts written off $2,000,000 800,000 36,000