Information related to Volkov Company for 1996 is summarized below:

\section*{Instructions}

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

(b) Assume that Volkov Company decides to estimate its bad debts expense to be \(3 \%\) of credit sales. What amount of bad debts expense will Volkov Company record if it has an Allowance for Doubtful Accounts credit balance of \(\$ 4,000\) ?

(c) Assume that Volkov Company decides to estimate its bad debts expense based on \(5 \%\) of accounts receivable. What amount of bad debts expense will Volkov Company record if it has an Allowance for Doubtful Accounts credit balance of \(\$ 3,000\) ?

(d) Assume the same facts as in (c), except that there is a \(\$ 3,000\) debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Volkov record?

(e) What is the 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 $2,000,000 $800,000 $36,000