P6-3 Compare two methods of accounting for uncollectible receivables Cyber Space Company, which operates a chain of 65 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 provision of 12% 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 Written Off Year Sales 1 2 3 4 1 2 3 $2,300,000 4,750,000 9,000,000 9,600,000 $ 5,000 9,000 23,000 37,500 $5,000 4,000 2,000 $ 5,000 12,000 5,500 $ 9,000 14,500 4. $17,500 Instructions 1. Assemble the desired data, using the following column headings: Expense Actually Reported Bad Debt Expense Expense Increase (Decrease) Based on in Amount of Estimate Expense Balance of Allowance Account, End of Year Year