Here is information related to Shashko Company for 2012.

Instructions

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

(b) Assume that Shashko Company decides to estimate its bad debts expense based on 4% 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 Shashko record?

(d) What is a 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 $1,500,000 840,000 37,000