Income Effects of Uncollectible Accounts}

The credit manager and the accountant for Goldsmith Company are attempting to assess the effect on net income of writing off \(\$ 100,000\) of receivables. Goldsmith uses the aging method of determining bad debt expense and has the following aging schedule for its accounts receivable at December 31,2018 :

The receivables being considered for write-off are all over 60 days past due.
\section*{Required:}
1. Assume that the tax rate is \(30 \%\). What will be the effect on net income if the \(\$ 100,000\) is written off?
2. What data would you examine to provide some assurance that a company was not holding uncollectible accounts in its accounts receivable rather than writing them off when they are determined to be uncollectible?
\section*{Case

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Accounts Receivable Category Amount Proportion Expected to Default Current 1-30 days past due $2,980,400 0.004 722,600 0.035 31 60 days past due 418,500 0.095 Over 60 days past due 322,800 0.250 $4,444,300