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    Dekalb Company

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    P9-2A Information related to Dekalb Company for 2006 is summarized below.

    Total Credit Sales $1,640,000
    Accounts Receivable at Dec. 31 620,000
    Bad debts written off 26,000

    Instructions

    a.) What amount of bad debts expense will Dekalb Company report if t uses the direct write-off method?
    b.) Assume that DeKalb Company decides to estimate its bad debts expense to be 2% of credit sales. What amount of bad debts expense will DeKalb record if Allowance for Doubtful Accounts has a credit balance of $3,000
    c.) Assume that DeKalb Company decides to estimate its bad expense based on 5% of Accounts receivable. What amount of bad debts expense will DeKalb 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 DeKalb record?
    e.) What is the weakness of the direct write-off method of reporting bad debts expense?

    P11-5A

    Prepare installment payments schedule and journal entries for a mortgage note payable.

    Otto Electronics issues an $800,000, 8%, 10-year mortgage note on December 31, 2006, to help finance a plant expansion program. The terms provide for semiannual installment payments, not including real estate taxes and insurance of $58,865. Payments are due June 30 and December 31.

    Instructions
    a.) Prepare an installment payment schedule for the first 2 years.
    b.) Prepare the entries for (1) the mortgage loan and (2) the first two installment payments. (June 30 Mortgage Notes Payable $26, 865)
    c.) Show how the total mortgage liability should be reported on the balance sheet at December 31, 2007. (Current Liability - 2007: $59, 276)

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    This solution assists in a specific problem related to Dekalb Company, and the write-off method.

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