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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 1.60% of credit
The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.60% of credit sales in prior periods. Presented below is the company's forecast of sales and expenses over the next three years. |
Sales Revenue | $ | 388,000 | $ | 394,000 | $ | 393,000 | |||
Bad Debt Expense | Unknown | Unknown | Unknown | ||||||
Other Expenses | 337,000 | 334,000 | 341,750 | ||||||
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 1.60% of sales. |
c. | Assume that the company changes its estimate of uncollectible credit sales to 1.60% in year 1, 2.60% in year 2 and 2.10% 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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