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    Bad Debt Accounting and journal entries

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    Here is information related to Kettle Moraine Company for 2007.
    Total credit sales $1,500,000
    Accounts receivable at December 31 440,000
    Bad debts written off 31,000

    Instructions:
    (a) What amount of bad debts expense will Kettle Moraine Company report if it uses the direct write-off method of accounting for bad debts?

    Formula

    (b) Assume that Kettle Moraine Company decides to estimate its bad debts expense based on 3% of
    accounts receivable. What amount of bad debts expense will the company record if Allowance for Doubtful
    Accounts has a credit balance of $3,000
    Amount X Percentage = Formula
    Plus debit balance Amount
    Formula

    (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 Kettle Moraine record?
    Amount X Percentage = Formula
    Plus debit balance Amount
    Formula

    (d) What is a weakness of the direct write-off method of reporting bad debts expense?

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    https://brainmass.com/business/financial-accounting-bookkeeping/bad-debt-accounting-and-journal-entries-344828

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    Solution Summary

    The solution calculates bad debts expense for Kettle Moraine Company under differenct bad debt accounting methods.

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