Here is information related to Kettle Moraine Company for 2007. Compute bad debt amounts.

SOI Total credit sales $1,500,000 (

Accounts receivable at December 31 440,000 Bad debts written off 31,000 Instructions

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

(b) Assume that Kettle Moraine 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 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 debts expense will Kettle Moraine record?

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