At January 1, 2020, the credit balance of Reimer Corp.’s allowance for doubtful accounts was $575,000. During 2020, the bad debt expense entry was based on a percentage of net credit sales. Net sales for 2020 were $16 million, of which 75% were on account.

Based on the information available at the time, the 2020 bad debt expense was estimated to be 1% of net credit sales. During 2020, uncollectible receivables amounting to $40,000 were written off against the allowance for doubtful accounts. The company has estimated that at December 31, 2020, based on a review of the aged accounts receivable, the allowance for doubtful accounts would be properly measured at $500,000.

Required:

a. Prepare a schedule calculating the balance in Reimer Corp.’s allowance for doubtful accounts at December 31, 2020. Prepare any necessary journal entry at year-end to adjust the allowance for doubtful accounts to the required balance.

b. If accounts receivable balance at December 31 was $50,950,000, prepare a partial classified balance sheet at December 31, 2020 for Reimer. What is the net accounts receivable balance intended to measure?

c. Under what conditions is using the direct write-off method justified?