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The chief accountant for Swifty Corporation provides you with the following list of accounts receivable written off in the current year. Date Customer Amount March 31 E. L. Masters Company $6,400 June 30 Stephen Crane Associates 5,500 September 30 Amy Lowell's Dress Shop 5,800 December 31 R. Frost, Inc. 8,000 Swifty 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 Swifty'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 $64,600 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? Net income would be $ higher under the percentage-of-receivables approach.

The chief accountant for Swifty Corporation provides you with the following list of accounts receivable written off in the current year. Date Customer Amount March 31 E. L. Masters Company $6,400 June 30 Stephen Crane Associates 5,500 September 30 Amy Lowell's Dress Shop 5,800 December 31 R. Frost, Inc. 8,000 Swifty 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 Swifty'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 $64,600 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? Net income would be $ higher under the percentage-of-receivables approach.

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 8Q: Aron Larson is a customer of Bank Enterprises. Mr. Larson took out a loan in the amount of $120,000...
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The chief accountant for Swifty Corporation provides you with the following list of accounts receivable written off in the current year. Date Customer Amount March 31 E. L. Masters Company $6,400 June 30 Stephen Crane Associates 5,500 September 30 Amy Lowell's Dress Shop 5,800 December 31 R. Frost, Inc. 8,000 Swifty 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 Swifty'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 $64,600 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? Net income would be $ higher under the percentage-of-receivables approach.
Transcribed Image Text:The chief accountant for Swifty Corporation provides you with the following list of accounts receivable written off in the current year. Date Customer Amount March 31 E. L. Masters Company $6,400 June 30 Stephen Crane Associates 5,500 September 30 Amy Lowell's Dress Shop 5,800 December 31 R. Frost, Inc. 8,000 Swifty 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 Swifty'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 $64,600 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? Net income would be $ higher under the percentage-of-receivables approach.
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