Question
The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.90% of credit
The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.90% of credit sales in prior periods. Presented below is the company's forecast of sales and expenses over the next three years. Year 1 Year 2 Year 3 Sales Revenue $ 376,000 $ 382,000 $ 381,000 Bad Debt Expense Unknown Unknown Unknown Other Expenses 337,000 337,000 333,750 Net Income Unknown Unknown Unknown Required: a. Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1.90% of sales. c. Assume that the company changes its estimate of uncollectible credit sales to 1.90% in year 1, 2.90% in year 2 and 2.40% in year 3. Calculate the Bad Debt Expense and net income for each of the three years under this alternative scenario.
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