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 $\frac{1}{2}\%$ 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

$\backslash$table$[[$Year$,$Sales,$\backslash$table$[[$Uncollectible Accounts$],[$Written Off$]],1$st$,2$nd$,3$rd$,4$th$],[1$st$,$$$1,290,000,$$$1,150,$$$1,150,,,],[2$nd$,1,620,000,2,750,1,300,$$$1,450,,],[3$rd$,2,830,000,12,300,3,550,2,850,$$$5,900,],[4$th$,3,140,000,15,400,,3,550,5,250,$$$6,600$