Check out some similar questions!

2peace · Mar 30, 2008, 07:16 PM

Hey I am having trouble with this part in my homework where we are to compute bad debt amounts with 3 methods used for uncollectable accounts. I am having trouble on the direct write-off method. In problem A it is asking for the amount of bad debts expense that the company will report using the direct write-off method. Here is the problem:

Code:

P9-2C Information related to Bee Company for 2008 is summarized below.
Total credit sales $1,100,000
Accounts receivable at December 31 369,000
Bad debts written off 22,150
Instructions
(a) What amount of bad debts expense will Bee Company report if it uses the direct write-off
method of accounting for bad debts?
(b) Assume that Bee Company decides to estimate its bad debts expense to be 2% of credit
sales. What amount of bad debts expense will Bee record if Allowance for Doubtful
Accounts has a credit balance of $3,000?
(c) Assume that Bee Company decides to estimate its bad debts expense based on 6% of accounts
receivable. What amount of bad debts expense will Bee Company record if
Allowance for Doubtful Accounts has a credit balance of $4,000?
(d) Assume the same facts as in (c), except that there is a $2,000 debit balance in Allowance for
Doubtful Accounts.What amount of bad debts expense will Bee record?

I haven't tried working on the other methods but if you can give me some insight on how to figure them out, I'll also appreciate it.

morgaine300 · Apr 3, 2008, 11:40 AM

Direct write-off method is actually the easiest one. That's when you charge it off to the expense at the time it's written off -- no estimates or adjusting entries or anything. You simply charge it to the bad debt expense and remove it from receivables. i.e. it goes directly out of receivables into the expense. For the amount actually written off.