Here is information for Zeus Ltd. for the 2012 calendar year:
| Total credit sales |
$6,600,000 |
| Accounts receivable at December 31 |
2,500,000 |
| Accounts receivable written off during year |
96,000 |
| Accounts receivable later recovered (after write off but before year end) |
16,000 |
|
|
At the end of the year, uncollectible accounts were estimated to total $104,000 based on an aging schedule. Instructions
| (a) |
What amount of bad debts expense will Zeus record if Allowance for Doubtful Accounts has an opening credit balance of $40,000 on January 1? |
| (b) |
Assume the same facts as in (a) except that there is a $20,000 opening credit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Zeus record? |
| (c) |
What are the advantages of using the allowance method of reporting bad debts expense? |
