Here is information related to Mingenback Company for 2022. Total credit sales $2,500,000 Accounts receivable at December 31 875,000 Uncollectibles 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 uncollectibles? b. Assume that Mingenback Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 6% of accounts receivable will become uncollectible. What amount of bad debt expense will Mingenback record if Allowance for Doubtful Accounts has a credit balance of $3,000? b. Bad debt expense $49,500 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?
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.
Here is information related to Mingenback Company for 2022.
Total credit sales $2,500,000
Accounts receivable at December 31 875,000
Uncollectibles 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 uncollectibles?
b. Assume that Mingenback Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 6% of accounts receivable will become uncollectible. What amount of bad debt expense will Mingenback record if Allowance for Doubtful Accounts has a credit balance of $3,000?
b. Bad debt expense $49,500
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 recording bad debt expense?
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