The chief accountant for Bramble Corporation provides you with the following list of accounts receivable written off in the current year. Date March 31 June 30 September 30 December 31 Customer E. L. Masters Company Stephen Crane Associates Amy Lowell's Dress Shop R. Frost, Inc. Amount $7,500 6,600 6,900 9,100 Bramble follows the policy of debiting Bad Debt Expense as accounts are written off. The chief accountant maintains that this procedure is appropriate for financial statement purposes because the Internal Revenue Service will not accept other methods for recognizing bad debts. All of Bramble's sales are on a 30-day credit basis. Sales for the current year total $2,200,000. The balance in Accounts Receivable at year-end is $81,100 and an analysis of customer risk and charge-off experience indicates that 12% of receivables will be uncollectible (assume a zero balance in the allowance). Net income would be $ (b) By what amount would income before taxes differ if bad debt expense was computed using the percentage-of-receivables approach? ✓ under the percentage-of-receivables approach.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
![The chief accountant for Bramble Corporation provides you with the following list of accounts receivable written off in the current
year.
Date
March 31
June 30
September 30
December 31
Customer
E. L. Masters Company
Stephen Crane Associates
Amy Lowell's Dress Shop
R. Frost, Inc.
Amount
$7,500
6,600
6.900
Net income would be $
9,100
Bramble follows the policy of debiting Bad Debt Expense as accounts are written off. The chief accountant maintains that this
procedure is appropriate for financial statement purposes because the Internal Revenue Service will not accept other methods for
recognizing bad debts.
All of Bramble's sales are on a 30-day credit basis. Sales for the current year total $2,200,000. The balance in Accounts Receivable at
year-end is $81,100 and an analysis of customer risk and charge-off experience indicates that 12% of receivables will be uncollectible
(assume a zero balance in the allowance).
(b) By what amount would income before taxes differ if bad debt expense was computed using the percentage-of-receivables
approach?
under the percentage-of-receivables approach.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9e14e833-b473-4144-adde-e217b311654e%2F7644832a-e78c-47b4-bdb4-f4dad867b1bc%2Fe2svmll_processed.png&w=3840&q=75)
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