Week 3 individual P9-2A - has an Allowance for Doubtful...

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Chapter 9 Exercise P9-2A 1 Chapter 9 Exercise P9-2A Fadi Fayad ACC/281 06/08/2011 Myra Mc Gill
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Chapter 9 Exercise P9-2A 2 Chapter 9 Exercise P9-2A P9-2A 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 (a) What amount of bad debts expense will Hermesch Company report if it uses the direct write-off method of accounting for bad debts? $33,000. (b) 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? $44,000 ($2,200,000 X 2%). (c) 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
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Unformatted text preview: has an Allowance for Doubtful Accounts credit balance of $3,000? $46,500 ($825,000 X 6%) $3,000 (d) Assume the same facts as in (c), except that there is a $3,000 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Hermesch record? $52,500 ($825,000 X 6%) + $3,000 (e) What is the weakness of the direct write-off method of reporting bad debts expense? Under direct write off method, Bad Debt expense will show only actual losses from un-collectibles. This method does not match bad debt expenses to sales revenues in the income statement References Chapter 9 Exercise P9-2A 3 Financial Accounting, 6e (Jerry J. Weygandt, 2008), Retrieved from: Chapter 9...
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Week 3 individual P9-2A - has an Allowance for Doubtful...

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