Effect of doubtful accounts on net income During its first year of operations, Mack's Plumbing Supply had sales of $5,740,000, wrote off $48,600 of accounts as uncollectible using the direct write-off method, and reported net income of $712,500. Assume that during the second year of operations Mack's Plumbing Supply had sales of $7,450,000, wrote off $52,000 of accounts as uncollectible using the direct write-off method, and reported net income of $800,000, a. Determine what net income would have been in the second year if the allowance method (using 1% of sales) had been used in both the first and second years. b. Determine what the balance of the allowance for doubtful accocints would have been at the end of the second year if the allowance method had been used in both the first and second years. x Fendues: Theamy Wos Under the diret write-olf method, bad Debt Expense is recorded when the customer's account is determund to be worthieas and written orf. There is no adjusting entry at yearend to record estimated bad debt, To compute net income uilng the allowance method, firnt compute net income before write-off of accounts associated with the bad debt expense