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Calculate bad debt amounts using different methods.The following information relates to Eason Ltd for 2019: Total credit sales Accounts receivable at 31 December 2019 Bad
Calculate bad debt amounts using different methods.The following information relates to Eason Ltd for 2019:
Total credit sales
Accounts receivable at 31 December 2019 Bad debts written off
Required
- (a)What amount of bad debts expense will Eason Ltd report if it uses the direct write-off method of accounting for bad debts?
- (b)Assume that Eason Ltd decides to estimate its bad debts expense based on 5% of accounts receivable. What amount of bad debts expense will the business record if it has an allowance for doubtful debts credit balance of $1600 at 31 December 2018?
- (c)Assume the same facts as in part (b), except that there is a debit balance of $1150 in allowance for doubtful debts. What amount of bad debts expense will Eason Ltd record?
- (d)What is the weakness of the direct write-off method of reporting bad debts expense?
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