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The expense recognition (matching) principle, as applied to bad debts, requires:

a. That expenses be ignored if their effect on the financial statements is unimportant to users' business decisions.

b. The use of the direct write-off method for bad debts.

c. The use of the allowance method of accounting for bad debts.

d. That bad debt be disclosed in the financial statements.

e. That bad debt not be written off.

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Deanna Hettinger
Deanna HettingerLv2
28 Jan 2020

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Problem 8-4A Here is information related to Splish Brothers Inc.for 2017. Total credit sales $1,580,000 Accounts receivable atDecember 31 790,000 Bad debts written off 39,500 (a) What amount ofbad debt expense will Splish Brothers Inc. report if it uses thedirect write-off method of accounting for bad debts? Bad debtsexpense $enter the bad debts expense in dollars assuming option a(b) Assume that Splish Brothers Inc. decides to estimate its baddebt expense based on 4% of accounts receivable. What amount of baddebt expense will the company record if Allowance for DoubtfulAccounts has a credit balance of $2,700? Bad debts expense $enterthe bad debts expense in dollars assuming option b (c) Assume thesame facts as in (b), except that there is a $1,000 debit balancein Allowance for Doubtful Accounts. What amount of bad debt expensewill Splish Brothers Inc. record? Bad debts expense $enter the baddebts expense in dollars assuming option c

Information related to Hermesch Company for 2012 is summarizedbelow.

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 ituses the direct writeoff method of accounting for bad debts?
$ ______

Assume that Hermesch Company estimates its bad debts expense to be2% of credit sales. What amount of bad debts expense will Hermeschrecord if it has an Allowance for Doubtful Accounts credit balanceof $4,000?
$ ______

Assume that Hermesch Company estimates its bad debts expense basedon 6% of accounts receivable. What amount of bad debts expense willHermesch record if it has an Allowance for Doubtful Accounts creditbalance of $3,000?
$ ______

Assume the same facts as in the question above, except that thereis a $3,000 debit balance in Allowance for Doubtful Accounts. Whatamount of bad debts expense will Hermesch record?
$ ______



Could you do all incorrect ones
P9-2A (a-d)

Information related to Hermesch Company for 2008 is summarizedbelow.
Total credit sales $2,200,000
Accounts receivable at December 31 825,000
Bad debts written off 33,000






Correct.

What amount of bad debts expense will Hermesch Company report if ituses the direct writeoff method of accounting for bad debts?
$ 33000










Correct.

Assume that Hermesch Company estimates its bad debts expense to be2% of credit sales. What amount of bad debts expense will Hermeschrecord if it has an Allowance for Doubtful Accounts credit balanceof $4,000?
$ 44000










Incorrect.

Assume that Hermesch Company estimates its bad debts expense basedon 6% of accounts receivable. What amount of bad debts expense willHermesch record if it has an Allowance for Doubtful Accounts creditbalance of $3,000?
$







Incorrect.

Assume that Hermesch Company estimates its bad debts expense basedon 6% of accounts receivable. There is a $3,000 debit balance inAllowance for Doubtful Accounts. What amount of bad debts expensewill Hermesch record?
$





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