P9.2A (LO 2) Writing Information related to Mingenback Company for 2020 is summarized below. $2,500,000 875,000 33,000 Total credit sales Accounts receivable at December 31 Bad debts written off Instructions a. What amount of bad debt expense will Mingenback Company report if it uses the direct write-off method of accounting for bad debts? b. Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receiv- able. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $3,000? c. Assume the same facts as in (b), except that there is a $3,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debt expense will Mingenback record? d. What is the weakness of the direct write-off method of reporting bad debt expense?
P9.2A (LO 2) Writing Information related to Mingenback Company for 2020 is summarized below. $2,500,000 875,000 33,000 Total credit sales Accounts receivable at December 31 Bad debts written off Instructions a. What amount of bad debt expense will Mingenback Company report if it uses the direct write-off method of accounting for bad debts? b. Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receiv- able. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $3,000? c. Assume the same facts as in (b), except that there is a $3,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debt expense will Mingenback record? d. What is the weakness of the direct write-off method of reporting bad debt expense?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
P9.2
Transcribed Image Text:**Information related to Mingenback Company for 2020:**
- **Total credit sales:** $2,500,000
- **Accounts receivable at December 31:** $875,000
- **Bad debts written off:** $33,000
**Instructions:**
a. What amount of bad debt expense will Mingenback Company report if it uses the direct write-off method of accounting for bad debts?
b. Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receivable. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful Accounts credit balance of $3,000?
c. Assume the same facts as in (b), except that there is a $3,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debt expense will Mingenback record?
d. What is the weakness of the direct write-off method of reporting bad debt expense?
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part d please
Transcribed Image Text:P9.2A (LO 2) Writing Information related to Mingenback Company for 2020 is summarized below.
$2,500,000
875,000
33,000
Total credit sales
Accounts receivable at December 31
Bad debts written off
Instructions
a. What amount of bad debt expense will Mingenback Company report if it uses the direct write-off
method of accounting for bad debts?
b. Assume that Mingenback Company estimates its bad debt expense based on 6% of accounts receiv-
able. What amount of bad debt expense will Mingenback record if it has an Allowance for Doubtful
Accounts credit balance of $3,000?
c. Assume the same facts as in (b), except that there is a $3,000 debit balance in Allowance for Doubtful
Accounts. What amount of bad debt expense will Mingenback record?
d. What is the weakness of the direct write-off method of reporting bad debt expense?
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