ACC P9-2A - Doubtful Accounts credit balance of $3,000? $...

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Information related to Hermesch Company for 2008 is summarized below. Total credit sales $2,200,000 Accounts receivable at December 31 825,000 Bad debts written off 33,000 What amount of bad debts expense will Hermesch Company report if it uses the direct writeoff method of accounting for bad debts? $ Assume that Hermesch Company estimates its bad debts expense to be 2% of credit sales. What amount of bad debts expense will Hermesch record if it has an Allowance for Doubtful Accounts credit balance of $4,000? $ Assume that Hermesch Company estimates its bad debts expense based on 6% of accounts receivable. What amount of bad debts expense will Hermesch record if it has an Allowance for
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Unformatted text preview: Doubtful Accounts credit balance of $3,000? $ Assume that Hermesch Company estimates its bad debts expense based on 6% of accounts receivable. There is a $3,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Hermesch record? (a) $33,222. (b) $44,358.8 ($2,217,940 X 2%). (c) $47,014.2 [($833,570 X 6%) $3,000]. (d) $53,014.2 [($833,570 X 6%) + $3,000]. (e) The weakness of the direct write-off method is two-fold. First, it does not match expenses with revenues. Second, the accounts receivable are not stated at cash realizable value at the balance sheet date....
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This note was uploaded on 05/10/2011 for the course STATS 202 taught by Professor Emil during the Spring '11 term at Aberystwyth University.

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