The chartered accountant is trying to decide which method of accounting for bad debts to use. The company is attempting to maximise its net income to meet projected figures. The bad debt expense is material to the companys financial statements.

Required

A) calculate bad debt expenses for 2016 under the direct write-off method and the allowance method.

B) calculate profit or loss under both methods ( assume a tax rate of 30 percent).

C) Does Knight have the option of which method to use under Australian Accounting Standards?

19 Comparing methods for uncollectible receivables LO2,3 The following data pertains to the operations of Knight Corporation for 2016: Net credit sales Net income (before bad debt expense Write-offs of uncollectible accounts Estimated uncollectible percentage of net credit sales $725000 135000 17 500 390