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1st 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
1st 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 % 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 Accounts Year Sales 2nd 3rd 4th Written oft 1st $1,310,000 $1,200 $1,200 2nd 1,640,000 2,800 1,300 $1,500 3rd 2,550,000 11,100 3,200 2,550 $5,350 4th 3,150,000 15,450 3,550 5,250 $6,650 Required: 1. Assemble the desired data.Enter a decrease in the amount of expense as a negative number and all other amounts as positive numbers Call Systems Company Bad Debt Expense Expense Actually Expense Based on Increase (Decrease) in Amount of Balance of Allowance Account, End Year Reported Estimate Expenser of Year Ist 2nd JE 3rd 11 E 4th 2. Experience during the first four years of operations indicated that the recevables were either collected the world uncollectible: Does the estimate of % of sales appear to be reasonably done to the actual experience with uncle first two years
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