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A recent annual report for RVC contained the following information (dollars in thousands) at the end of its fiscal year: $ $ Accounts receivable Allowance
A recent annual report for RVC contained the following information (dollars in thousands) at the end of its fiscal year: $ $ Accounts receivable Allowance for doubtful accounts Year 2 9,088,000 (1,029,000) 8,059,000 Year 1 8,626,000 (560,000) 8,066,000 $ $ A footnote to the financial statements disclosed that uncollectible accounts amounting to $814,000 and $428,000 were written off as bad debts during year 2 and year 1, respectively. Assume that the tax rate for RVC was 35 percent. Required: 1. Determine the bad debt expense for year 2 based on the preceding facts. (Hint. Use the Allowance for Doubtful Accounts T-account to solve for the missing value.) (Enter your answers in thousands not in dollars.) 2. Working capital is defined as current assets minus current liabilities. Would the working capital be affected by the write-off of an uncollectible account? 3. Would the net income be affected by the $814,000 write-off during year 2? 1. Bad debt expense Would the working capital be affected by the write-off of an uncollectible account? Would the net income be affected by the $814,000 write-off during year 2? 3
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