eBook 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 % 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 Uncollectible Accounts Year Sales 2nd 3rd 4th Written oll 1st $1,000 $1,700 15 $1,100,000 2nd 1,870,000 3rd 2,810,000 4th 3,220,000 Required: $1,000 3,200 12,200 15,800 1,500 3,550 2,800 3,650 $5,850 5.350 $6,800 1. Astemble 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 Falance of Allowance Account, End of Year 2,800 $5,850 3,550 12,200 3rd 5,350 $6,800 2,810,000 3,220,000 3,650 th 15,800 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 Balance of Allowance Account, End of Year Expense Based on Estimate Increase (Decrease) in Amount of Expense Expense Actually Reported Year 2nd 3rd ins 4th 2. Expenence 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 dose to the actual experience with uncollectible accounts originating during the first two years