You have obtained the following information about Eskasoni Inc. (Eskasoni) from its 2014 annual report:

i. Eskasoni’s year-end is November 30.

ii. Sales for the year ended November 30, 2014, were $3,750,000; 78 percent of sales are credit sales.

il. The balance in accounts receivable on November 30, 2014, was $386,000.

iv. The balance in allowance for uncollectible accounts on November 30, 2013, was

$20,800.

v. During fiscal 2014, Eskasoni wrote off $23,000 of accounts receivable.

vi. The bad debt expense can be estimated as 0.75 percent of credit sales or 5 percent of year-end accounts receivable.

Net income for the year ended November 30, 2014, including all revenues and expenses except for the bad debt expense, was $75,000.

Required:

a. Determine the bad debt expense for the year ended 2014, assuming that Eskasoni used:
i. the direct-writeoff method for accounting for uncollectible accounts.
ii. the percentage-of-credit-sales method for accounting for uncollectible accounts.
iii. the percentage-of-receivables method for accounting for uncollectible accounts.

b. What would be the balance in allowance for uncollectible accounts on November 30, 2014 using the three methods identified in (a)?

c. Prepare the journal entry required to record the bad debt expense under each of the three methods identified in (a).

d. What would net income be in 2014 under each of the three methods in (a)?

e. Explain why the three methods in

(a) provide different bad debt expenses.

f. Which method of determining the bad debt expense and the allowance for uncollectible accounts is best? Explain.