Here is information related to Hohenberger Company for 2001:

Instructions

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

(b) Assume that Hohenberger Company decides to estimate its bad debts expense based on 3% of accounts receivable. What amount of bad debts expense will the company record if it has an Allowance for Doubtful Accounts credit balance of $4,000?

(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 Hohenberger record?

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

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