Chapter 9, Problem 9.2AP

(a)

To determine

Bad debts:

Bad debts can be defined as those accounts receivable that a firm does not expect to collect and has written off to its income statement under the head, expense. They are also termed as irrecoverable debts.

Bad debts are considered as expenses, as they are not anticipated to generate any financial benefits in the future. It leads to a corresponding decrease in the balance of accounts receivable on the balance sheet, as the bad debts are no longer an asset.

To determine: The bad debts expense M Company would report.

(b)

To determine

The amount of bad debt expense M Company would record if it has an Allowance for Doubtful Accounts credit balance of $4,000.

(c)

To determine

The amount of bad debt expense M Company would record if it has an Allowance for Doubtful Accounts credit balance of $3,000.

(d)

To determine

The amount of bad debt expense M Company would record.

(e)

To determine

The weakness of the direct write-off method of reporting bad debt expense.