Estimating and Recording Bad Debt Estimates and Write$-$Offs; Reporting of Accounts Receivable d$.$ For reporting purposes in looking at part $b,$ what is one limitation when using assumption $1$ and when using assumption $4?$

Note: Do not use negative signs with any of your answers.

d$.$

Limitation of Assumption $1$

Limitation of Assumption $4$

Rarely acceptable under GAAP.

At December $31,$ its annual year$-$end, the accounts of Sun Systems Inc. show the following.

$$504,000$ in sales revenue for the year, of which one$-$sixth was on account.

$$2,520$ credit balance in Allowance for Doubtful Accounts, as of December $31$ of the prior year.

$$50,540$ debit balance in Accounts Receivable as of December $31$ of the current year $($prior to any write$-$offs

of uncollectible accounts during the current year$).$

$$2,940$ in uncollectible accounts to be written off as of December $31$ of the current year.

Aging schedule at December $31$ of the current year, showing the following breakdown of total accounts receivable

excluding amounts to be written off.

Required

a$.$ Prepare the entry to write off the uncollectible accounts.

Bad debt expense is based on $1\mathrm{.}5\%$ of credit sales.

$\_.$ Allowance for doubtful accounts is based on $2\mathrm{.}5\%$ of total receivables at year$-$end.

Allowance for doubtful accounts is based on the following aging schedule: Not past due, $0\mathrm{.}5\%$; Past

due $1-60$ days, $1\%$; and Past due over $60$ days, $8\%.$

Bad debt expense is based on the direct write$-$off method $($assume entry in part a has not been recorded$).$

allowance for doubtful accounts on December $31$ of the prior year.

d$.$ For reporting purposes in looking at part b$,$ what is one limitation when using assumption $1$ and when using assumption $4?$