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Digital Depot Company, which operates a chain of 25 electronics supply stores, has just completed its fourth year of operations. The direct write-off method of
Digital Depot Company, which operates a chain of 25 electronics supply stores, 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 firm is considering changing to the allowance method. Information is requested as to the effect that an annual provison of 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 Recelvable Written Off as Uncollectible Uncollectible Accounts Written off Year Sales 1 $1,150,000 2 1,860,000 3 2,800,000 4 3,530,000 Requiredt $1,050 3,150 12.200 17,300 $1,050 1,500 3,550 $1,650 2,800 4,000 s5,850 5,900 $7,400 1. Assembie the desired data. Enter all amounts as postive numbers Digtal Depot Comeany Schodle of Bad Debt Expes Bated on Esomace ncrease (ecreas) in Amount of Expense Blace or Allowarce Account, End of Year Estncreae rear Expente Actualy Reported Expinse 1050 1,150 12,200 7300
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