Name: Date: 10/19/20
Instructor: Jordi Morrós Course: 3r
P8-4A, Compute bad debt amounts.
Here is information related to Shashko Company for 2012.
Total credit sales $1,500,000
Accounts receivable at December 31 840,000
Bad debts written off 37,000
Instructions:
$37.000
4% of
accounts receivable. What amount of bad debts expense will the company record if Allowance for Doub
Accounts has a credit balance of $3,000 ?
$840.000 ×4% =$33.600
Less credit balance $3.000
$30.600
$1,000 debit balance in
Allowance for Doubtful Accounts. What amount of bad debts expense will Shashko record?
$840.000 ×4% =$33.600
Plus debit balance $1.000
$34.600
Financial Accounting, Sixth Edition by Kimmel, Weygandt, and Kieso
Primer on Using Excel in Accounting by Rex A Schildhouse
(a) What amount of bad debts expense will Shashko Company report if it uses the direct write-off method of
accounting for bad debts?
(b) Assume that Shashko Company decides to estimate its bad debts expense based on
(c) Assume the same facts as in part (b), except that there is a
(d) What is a weakness of the direct write-off method of reporting bad debts expense?
There are two major weaknesses with the direct write-off method. First, it does not match expenses with revenues.
Second, the accounts recievable are not stated at cash realizablle value at the balance sheet date.
