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 v% of sales would have had on the amount of bad debe 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 Written ofr 1st 2nd 3rd 1st $1,390,000 $1,250 $1,250 2nd 1,880,000 3,200 1,500 $1,700 3rd 2,510,000 10,900 3,150 2,500 $5,250 3,530,000 17,300 4,000 5,900 $7,400 4th 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 Increase Balance (Decrease) of Allowance in Amount Account, Expense Expense Call Systems Company Bad Debt Expense Expense Actually Reported 1,250 Year Increase Balance (Decrease) of Allowance in Amount Account, of Expense End of Year Expense Based on Estimate 6,950 1st 5,700 5,700 2nd 3,200 9,400 6,200 3rd 10,900 12,550 1,650 4th 350 17,300 17,650 2. Experience during the first four years of operations indicated that the receivables were either co the estimate of 12% of sales appear to be reasonably close to the actual experience with uncollectib Yes