The Dubious Company operates in an industry where all sales

The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.10% of credit sales in prior periods. Presented below is the company\'s forecast of sales and expenses over the next three years.

The Dubious Company operates in an industry where all sales are made on account. The company has experienced bad debt losses of 1.10% 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 2 Year 3 Sales Revenue $ 378,000 $384,000 383,000 Bad Debt Other Expenses Net Income Unknown 330,000 Unknown Unknown 336,000 Unknown Unknown 333,750 Unknown Expense Required: a. Calculate Bad Debt Expense and net income for each of the three years, assuming uncollectible accounts are estimated as 1.10% of sales Year 1 Year 2 Year 3 Bad Debt Expense Net Income , Assume that the company changes its estimate of uncollectible credit sales to 1.10% in year 1, 2.10% in year 2 and 1.60% in year 3. Calculate the Bad Debt Expense and net income for each of the three years under this alternative scenario. Year 1 Year 2 Year 3 Bad Debt Expense Net Income

Solution

Net Income when Bad debts are 1.10% of Sales a) Year 1 Year 2 Year 3 Sales Revenue             378,000.00             384,000.00             383,000.00 Bad Debts (1.10% of Sales)                  4,158.00                  4,224.00                  4,213.00 Other Expenses             330,000.00             336,000.00             333,750.00 Net Income                43,842.00                43,776.00                45,037.00 Net Income when Bad debts are 1.10% in Year 1.2.10% in Year 2 & 1.60% in Year 3 b) Year 1 Year 2 Year 3 Sales Revenue             378,000.00             384,000.00             383,000.00 Bad Debts                  4,158.00                  8,064.00                  6,128.00 Other Expenses             330,000.00             336,000.00             333,750.00 Net Income                43,842.00                39,936.00                43,122.00