The Dubious Company operates in an industry where all sales are made on account

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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 1.70% of credit sales in prior periods.

Presented below is the company's forecast of sales and expenses over the next three years.

Required:

a. Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 170% of sales

b. Assume that the company changes its estimate of uncollectible credit sales to 1.70% in Year 1, 2.70% in Year 2 and 2 20% in Year 3. Calculate the Bad Debt Expense and net income for each of the three years under this alternative scenario.

connect.mheducation.com/flow/connect.html Chapter 6010) The Dubious Company operates in an industry where all sales are made

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

business accounting

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Answer 1

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Answer #1

The dubious Company - Part a

	Year 1	Year 2	Year 3
Sales ( a )	369000	375000	374000
Bad debt exp. ( 1.7% * a )	6273	6375	6358
Other exp.	339000	341000	335750
Net income	23727	27625	31892

The dubious Company - Part b

	Year 1	Year 2	Year 3
Sales ( a )	369000	375000	374000
Bad debt exp.	6273	10125	8228
Other exp.	339000	341000	335750
Net income	23727	23875	30022

The dubious Company - Part a

	Year 1	Year 2	Year 3
Sales ( a )	369000	375000	374000
Bad debt exp. ( 1.7% * a )	=B4*1.7%	=C4*1.7%	=D4*1.7%
Other exp.	339000	341000	335750
Net income	=B4-B5-B6	=C4-C5-C6	=D4-D5-D6

The dubious Company - Part b

	Year 1	Year 2	Year 3
Sales ( a )	369000	375000	374000
Bad debt exp.	=B12*1.7%	=C12*2.7%	=D12*2.2%
Other exp.	339000	341000	335750
Net income	=B12-B13-B14	=C12-C13-C14	=D12-D13-D14

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Answer 2

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The Dubious Company operates in an industry where all sales are made on account

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