P8-2A Information related to Hamilton Company for 2014 is summarized below.
Total credit sales $2,500,000
Accounts receivable at December 31 970,000
Bad debts written off 66,000
Instructions
(a) What amount of bad debt expense will Hamilton Company report if it uses the direct
Write-off method of accounting for bad debts?
(b) Assume that Hamilton Company estimates its bad debt expense to be 3% of credit
Sales. What amount of bad debt expense will Hamilton record if it has an Allowance
For Doubtful Accounts credit balance of $4,000?
(c) Assume that Hamilton Company estimates its bad debt expense based on 7% of
Accounts receivable. What amount of bad debt expense will Hamilton 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 Al-
Lowance for Doubtful Accounts. What amount of bad debt expense will Hamilton
Record?
(e) What is the weakness of the direct write-off method of reporting bad debt
Expense?