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

Question

The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.90% 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 3 Year 2 376,000 382,000 $ 381,000 Unknown 338,000 Sales Revenue Bad Debt Other Expenses Net Income Unknown 331,000 Unknown Unknown 333,750 Unknown Expense Unknown Required: a. Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1 .90% of sales Year 1 Year 2 Year 3 Bad Debt Expense Net Income

Explanation / Answer

Answer a

Working note 1: Calculation of bad debt expenses in each of the 3 years

Working note 2: Calculation of Net Income in each of the 3 years

Answer

Answer c

Working note 1: Calculation of bad debt expenses in each of the 3 years

Working note 2: Calculation of Net Income in each of the 3 years

Answer

Particulars Year 1 ($) Year 2 ($) Year 3 ($) Sales Revenue 376,000 382,000 381,000 % of uncollectible account 1.90 % 1.90 % 1.90 % Bad debt expenses 7,144 7,258 7,239

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