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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 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 (1)/(2)% 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 $1,250,000 $1,150 $1,150
2nd 1,740,0002,9501,400 $1,550
3rd 2,620,00011,4003,3002,600 $5,500
4th 3,160,00015,5003,5505,250 $6,700
Required:
Question Content Area
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 $fill in the blank bf96ab042fc1ff0_1
$fill in the blank bf96ab042fc1ff0_2
$fill in the blank bf96ab042fc1ff0_3
$fill in the blank bf96ab042fc1ff0_4
2nd fill in the blank bf96ab042fc1ff0_5
fill in the blank bf96ab042fc1ff0_6
fill in the blank bf96ab042fc1ff0_7
fill in the blank bf96ab042fc1ff0_8
3rd fill in the blank bf96ab042fc1ff0_9
fill in the blank bf96ab042fc1ff0_10
fill in the blank bf96ab042fc1ff0_11
fill in the blank bf96ab042fc1ff0_12
4th fill in the blank bf96ab042fc1ff0_13
fill in the blank bf96ab042fc1ff0_14
fill in the blank bf96ab042fc1ff0_15
fill in the blank bf96ab042fc1ff0_16
Question Content Area
2. 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 (1)/(2)% of sales appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years?
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