of
×=
×=
Name:
HILLARY'SILVA
Date:
Instructor:
JORDI'MORROS
Course:
3rd'IBE
Financial3Accounting,'Sixth'Edition'by'Kimmel,'Weygandt,'and'Kieso
Primer3on3Using3Excel3in3Accounting'by'Rex'A'Schildhouse
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:
(a) What amount of bad debts expense will Shashko Company report if it uses the direct write-off method of accounting for
bad debts?
$37.000
(b) Assume that Shashko Company decides to estimate its bad debts expense based on
4%
accounts+receivable.+What+amount+of+bad+debts+expense+will+the+company+record+if+Allowance+for+Doubtful+
Accounts+has+a+credit+balance+of
$3.000
?
$840.000
4%
$33.600
Less+credit+balance
$3.000
$30.600
(c) Assume the same facts as in part (b), except that there is a
$1.000
debit balance in
Allowance for Doubtful Accounts. What amount of bad debts expense will Shashko record?
$840.000
4%
$33.600
we can say that there are 2 weakness with the direct write- method: - it does not match
expenses with revenues - accounts receivable are not stated at
cash realizable value at the balance sheet date.
Plus+debit+balance
$1.000
$34.600
(d) What is a weakness of the direct write-off method of reporting bad debts expense?