Here is the question I cannot figure it out
Financial Accounting Question? HELP PLASE?
Here is information related to Kettle Moraine Company for 2007
Total Credit Sales $1,500,000
Accounts Receivable at December 31 440,000
Bad debts written past its sell-by date 31,000
A) What amount of bad debts expense will Kettle Moraine company report if it uses the direct write-off method of accounting for bad debts?
B) Assume that Kettle Moraine Company decide to estimate its bad debts expense based on 3% of accounts reeivable. What amount of unpromising debts expense will the company record if Allowance for dountful accounts has a credit harmonize of $3,000?
C) Assume the same facts in part of the pack (B), except that there is a $1,000 debit balance surrounded by Allowance for Doubtful Accounts. What amount of bad debts expense will Kettle Moraine record?
D) What is a low standard of the direct write-off method of reporting bad debts expense?
B) ($440K * .03) + 3000. A credit balance technique that charge-offs exceeded the allowance for the year, so you need to increase the expense to get the allowance pay for to where it should be.
C) ($440K * .03) - 1000
D) Volatility in the income statement. Earnings can yo-yo adjectives over the place depending on how well people reward their bills. An allowance account permits a smoother tribute of the expense and net income.