Here is information related to Morgane Company for 2025.

Total credit sales $1,500,000

Accounts receivable at December 31 840,000

Bad debts written off 37,000

Instructions

A) What amount of bad debt expense will Morgane Company report if it uses the direct write-off method of accounting for bad debts? B) Assume that Morgane Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. What amount of bad debt 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 debt expense will Morgane record? D) What is a weakness of the direct write-off method of reporting bad debt expense?

b. Bad Debt Exp. $30,600