The Schnur Company uses the allowance method of accounting for bad debts. In 2014, the Schnur Company had sales of $90 million on credit. Based on its historical experience, it expects that it will collect all but 1% of these amounts. Over the course of the year, it makes entries to record

$900,000 of bad debt expense and to increase the allowance for doubtful accounts.

During 2014, it becomes aware of $330,000 of amounts from specific customers that are not collectible.

A. What will be the balance in the allowance for doubtful accounts at the end of 2014?

B. Assume that in 2015, it writes off another $400,000 of specific accounts, and collects all of the remaining receivables related to 2014 sales.

a. Was the 2014 bad debt expense too high or too low?

b. What will be the effect of the 2014 misestimate on 2015 income?
C. Assume that in 2015, it writes off another $900,000 of specific accounts, and collects all of the remaining receivables related to 2014 sales.

a. Was the 2014 bad debt expense too high or too low?

b. What will be the effect of the 2014 misestimate on 2015 income?