Call Systems Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the company is considering changing to the allowance method Information is requested as to the effect that an annual provision of 1% of sales would have had on the amount of bad debt expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Year of Origin of Accounts Receivable Written Off as Uncollectible Uncollectible Year Sales Accounts Written Off 2 4 1 $ 900,000 2 1,250,000 $ 4,500 $4,500 9,600 3,000 $6,600 3 1,500,000 12,800 1,000 3,700 $8,100 4 2,200,000 16,550 1,500 4,300 $10,750 1. Assemble the desired data, using the following column headings: Bad Debt Expense Balance of Allowance Expense Actually Expense Based on Increase (Decrease) Account, Year Reported Estimate in Amount of Expense End of Year 1 24 2

Call Systems Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording bad debt expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the company is considering changing to the allowance method Information is requested as to the effect that an annual provision of 1% of sales would have had on the amount of bad debt expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Year of Origin of Accounts Receivable Written Off as Uncollectible Uncollectible Year Sales Accounts Written Off 2 4 1 $ 900,000 2 1,250,000 $ 4,500 $4,500 9,600 3,000 $6,600 3 1,500,000 12,800 1,000 3,700 $8,100 4 2,200,000 16,550 1,500 4,300 $10,750 1. Assemble the desired data, using the following column headings: Bad Debt Expense Balance of Allowance Expense Actually Expense Based on Increase (Decrease) Account, Year Reported Estimate in Amount of Expense End of Year 1 24 2

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Vishnu
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