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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:

  1. Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1.30% of sales.
  2. 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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