Effect of Doubtful Accounts on Net Income During its first year of operations, Fisher Plumbing Supply Co. had sales of $590,000, wrote off $9,400 of accounts as uncollectible using the direct write-off method, and reported net income of $64,900. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1 1/4% of sales would be uncollectible.

Effect of Doubtful Accounts on Net Income During its first year of operations, Fisher Plumbing Supply Co. had sales of $590,000, wrote off $9,400 of accounts as uncollectible using the direct write-off method, and reported net income of $64,900. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1 1/4% of sales would be uncollectible.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter16: Accounting For Accounts Receivable

Section: Chapter Questions

Problem 1CP: Martel Co. has 320,000 in Accounts Receivable on December 31, 20-1, the end of its first year of...

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At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in Allowance for Doubtful Accounts. Martel has now been in business for three years and wants to base its estimate of uncollectible accounts on its own experience. Assume that Martel Co.s adjusting entry for uncollectible accounts on December 31, 20-2, was a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts of 25,000. (a) Estimate Martels uncollectible accounts percentage based on its actual bad debt experience during the past two years. (b) Prepare the adjusting entry on December 31, 20-3, for Martel Co.s uncollectible accounts.
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