Uncollectible accounts; allowance method vs. direct write-off method
Response to the following problem:
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2016, net credit sales totaled $4,500,000, and the estimated bad debt percentage is 1.5%. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2016 and $40,000, after adjusting entries, at the end of 2016.
Required:
1. What is bad debt expense for 2016?
2. Determine the amount of accounts receivable written off during 2016.
3. If the company uses the direct write-off method, what would bad debt expense be for 2016?