how do they get the numbers for BDE in question (b)? explain. I dont understand how to get 220, 355, 200 in bad debt expense

a. P3-12. Suggested solution: computer Cost : $1,000,000 Annual net income with accounting policy set 1 2021 2022 2023 2024 Sales $3,000,000 $3,500,000 $4,000,000 $500,000 Operating expenses (2,100,000) (2,500,000) (2.700,000) (350,000) Warranty expense (9% of sales, (270,000) (315,000) (360,000) (170,000) except 2024) Bad debt expense (5% of sales, (150,000) (175,000) (200,000) (75,000) except 2024) Depreciation expense (straight line) (250,000) (250,000) (250,000) (250,000) Gain on disposal 0 0 400.000 Net income 230.000 260.000 490.000 55.000 b. Annual net income with accounting policy set 2 2021 2022 2023 2024 Sales $3,000,000 $3,500,000 $4,000,000 $500,000 Operating expenses (2,100,000) (2,500,000) (2,700,000) (350,000) 1,000,000 4ycan (350,000) (400,000) (65,000) (355,000) (200,000) (175,000) Warranty expense (10% of sales, (300,000) except 2024) Bad debt expense or recovery (ADA (220,000) at 40% of gross A/R-see below) Depreciation expense (50% declining (500,000) balance) 1000,000 x 50% Gain on disposal Net income (loss) (120,000) (250,000) (125,000) (62,500) Soo,cox50% 250,000% 50% 125.000 0 0 337,500 45.000 575.000 535.000 BDE (plug) Derivation of bad debt expense (BDE) for cach year: Allowance for Accounts doubtful accounts receivable CADA 2021 Jan 1 balance 0 2021 Credit sales 3,000 Collections 2,600 Write-offs 100 100 200 un collectible 220 2021 Dec 31 balance 300 *40% 120 2022 Credit sales 3,500 Collections 2,800 Write-offs 125 355 2022 Dec 31 balance 875 x40% 350 2023 Credit sales 4,000 Collections 3,800 Write-offs 200 200 Required balance 125 BDE (plug) Required balance Copyright 2020 Pearson Canada Inc. 3-42 P3-12. No "true" net income L.O. 3-2) (Medium-30 minutes) Computer Consulting Limited was started in early 2021 and continued to operate until early 2024, when it was wound up due to disputes between the two principal owners. When it started. the company considered two sets of accounting policies. Accounting policy set 1: 1. Use straight-line depreciation method on the firm's only asset. The computer cost $1,000,000 and has an estimated useful life of four years. b. Estimate warranty expense as 9% of sales. c. Estimate bad debts expense as 5% of sales. Accounting policy set 2: 4. Use 50% declining-balance method for depreciation. b. Estimate warranty expense as 10% of sales. c. The year-end allowance for doubtful accounts should be 40% of gross accounts receivable. Actual events, cash flows, and transactions are as follows 2021 2022 2023 2024 Sales (all on account) $3,000,000 $3,500,000 $4,000,000 $ 500,000 Warranties paid 250,000 275,000 410,000 180,000 Proceeds on disposal of computer 400,000 Accounts receivable collected during the year 2,600,000 2,800,000 3,800,000 1,200,000 Accounts receivable written off during the year 100,000 125,000 200,000 175,000 All other expenses (paid in cash in the year incurred) 2,100,000 2,500,000 2,700,000 350,000 Required: 2. Derive net income for 2021 to 2024 using the first set of accounting policies. For the year- end balance for 2024, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differ- ences have been resolved. b. Derive net income for 2021 to 2024 using the second set of accounting policies. For the year-end balance for 2024, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. c. Derive the annual net cash flows for 2021 to 2024. d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years. What does this tell us about ner income and accrual accounting . Why were the net incomes different between the two sets of accounting policies? f. What caused the net income in 2024 to be so high for the second set of accounting policies