Compare Two Methods of Accounting for Uncollectible Receivables

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 Year Sales Uncollectible Accounts Written Off 1st 2nd 3rd 4th

1st $1,230,000 $1,100 $1,100

2nd 1,850,000 3,150 1,500 $1,650

3rd 2,700,000 11,750 3,400 2,700 $5,650

4th 3,640,000 17,850 4,100 6,050 $7,700

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 4% 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 Written Year Sales 1st 2nd 3rd $1,100 $1.650 1st $1,230,000 2nd 1,850,000 3rd 2,700,000 4th 3,540,000 Required: $1,100 3,150 11,750 17,850 1,500 3,400 2.700 $5.650 4.100 6,050 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 Year Expense Actually Reported Expense Based on Estimate Increase (Decrease) in Amount of Expense Balance of Allowance Account End of Year 1st 5 1.100 3.150 11.750 17.3507 Check My Work 3 more Check My Work uses remaining Previous Next All work saved. mail Instructor Save and Exit Submit Assignment for Grading - search e i * a - Allg n . ) 578/2020