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The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.30% of credit
The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.30% 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 | $ | 387,000 | $ | 393,000 | $ | 392,000 | ||||||||
Bad Debt Expense | Unknown | Unknown | Unknown | |||||||||||
Other Expenses | 332,000 | 334,000 | 342,750 | |||||||||||
Net Income | Unknown | Unknown | Unknown | |||||||||||
Required:
- Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1.30% of sales.
- Assume that the company changes its estimate of uncollectible credit sales to 1.30% in Year 1, 2.30% in Year 2 and 1.80% 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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