InferringBad Debt Expenseand Determining theImpact of Uncollectible Accounts onIncome and WorkingCapital
A recent annual report for Target contained the following information ( dollars in thou sand s) at the end of its fiscal year:
| Year 2 | Year I |
Accounts receivable | $9,094,000 | $8,624.000 |
Allowance for doubtful accounts | (1,010,000 ) | (570,000 ) |
| $8.084.000 | $8,054,000 |
A footnote to the financial statements disclosed that uncollectible accounts amounting to $8 11.000 and $428.000 were written off as bad debts during year 2 and year 1, respectively. Assume that the tax rate for Target was 30 percent.
Required:
1. Determine the bad debt expense for year 2 based on the preceding fact s. (Hint:Use the Allowance for Doubtful Accounts T-account to solve for the missing value.)
2. Working capital is defined as current asset s minus current liabilities. How was Target’s working capital affected by the write-off of 58 11.000 in uncollectible accounts during year 2? What impact did the recording of bad debt expense have on working capital in year 2?
3. How was net income affected by the 58 11.000 writ e-off during year 2" What impact did recording bad debt expense have on net income for year 2?
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.