Response to the following problem:
Caton China Corporation had credit sales of $610,000 for the year ended December 31, 2016, accounts receivable of $60,500, and a credit balance of $250 in the Allowance for Doubtful Accounts general ledger account at the end of the year.
Required: 1. Record the bad debt expense for the year, using each of the following methods for the estimate:
a. The allowance for doubtful accounts is to be increased to 4 per cent of accounts receivable.
b. Bad debt expense is estimated to be 0.45 per cent of credit sales.
c. The allowance for doubtful accounts is to be increased to $3,700, as indicated by an ageing schedule.
2. Which method would you choose and why?