Dortmund Stockyard reports $900,000 in credit sales for 2018 and $807,670 in 2019. It has a $677,000 accounts receivable balance at the end of 2018, and $683,000 at the end of 2019. Dortmund uses the balance sheet method to record bad debt estimation at 7% during 2018. To manage earnings more favorably, Dortmund changes bad debt estimation to the income statement method at 5% during 2019. A. Determine the bad debt estimation for 2018. $fill in the blank 1 B. Determine the bad debt estimation for 2019. Round your answer to two decimal places. $fill in the blank 2 C. How does the new total uncollectible amount affect net income and net accounts receivable? a. Bad debt expense is lower, net income is higher, and net receivables are higher. b. Bad debt expense is lower, net income is higher, and net receivables are lower. c. Bad debt expense is higher, net income is lower, and net receivables are higher. d. Bad debt expense is higher, net income is lower, and net receivables are lower.
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Dortmund Stockyard reports $900,000 in credit sales for 2018 and $807,670 in 2019. It has a $677,000
accounts receivable balance at the end of 2018, and $683,000 at the end of 2019. Dortmund uses thebalance sheet method to recordbad debt estimation at 7% during 2018. To manage earnings more favorably, Dortmund changes bad debt estimation to the income statement method at 5% during 2019.A. Determine the bad debt estimation for 2018.
$fill in the blank 1
B. Determine the bad debt estimation for 2019. Round your answer to two decimal places.
$fill in the blank 2
C. How does the new total uncollectible amount affect net income and net accounts receivable?
a. Bad debt expense is lower, net income is higher, and net receivables are higher. b. Bad debt expense is lower, net income is higher, and net receivables are lower. c. Bad debt expense is higher, net income is lower, and net receivables are higher. d. Bad debt expense is higher, net income is lower, and net receivables are lower. FeedbackA. Remember that the balance sheet method uses receivables rather than sales.
B. The income statement method uses the applicable revenue account to determine the necessary amount.
C. What is the effect of using the income statement approach versus the balance sheet approach? What effect does this have on the uncollectible amounts and how can this change be interpreted concerning the financial position of the company?
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