The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.80% 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

$

373,000

$

379,000

$

378,000

Bad Debt Expense

Unknown

Unknown

Unknown

Other Expenses

337,000

334,000

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 1.80% of sales.

	Year 1	Year 2	Year 3
Bad Debt Expense	$6,714	$6,822	$6,804
Net Income	$29,286	$38,178	$37,446

c.

Assume that the company changes its estimate of uncollectible credit sales to 1.80% in year 1, 2.80% in year 2 and 2.30% in year 3. Calculate the Bad Debt Expense and net income for each of the three years under this alternative scenario.

	Year 1	Year 2	Year 3
Bad Debt Expense	$6,714	$10,612	$8,694
Net Income	29,286		35,556