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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.
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 writeoff 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
st
nd
rd
th
st $ $ $
nd $
rd $
th $
Required:
Question Content Area
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
st $fill in the blank bfabfcff
$fill in the blank bfabfcff
$fill in the blank bfabfcff
$fill in the blank bfabfcff
nd fill in the blank bfabfcff
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fill in the blank bfabfcff
rd fill in the blank bfabfcff
fill in the blank bfabfcff
fill in the blank bfabfcff
fill in the blank bfabfcff
th fill in the blank bfabfcff
fill in the blank bfabfcff
fill in the blank bfabfcff
fill in the blank bfabfcff
Question Content Area
Experience during the first four years of operations indicated that the receivables were either collected within two years or had to be written off as uncollectible. Does the estimate of of sales appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years?
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