Wildhorse follows the policy of debiting Bad Debt Expense as accounts are written off. The chief accountant maintains that this procedure is appropriate for financial statement purposes because the Internal Revenue Service will not accept other methods for recognizing bad debts. All of Wildhorse's sales are on a 30-day credit basis. Sales for the current year total $2,200,000. The balance in Accounts Receivable at year-end is $87,100 and an analysis of customer risk and charge-off experience indicates that 12% of receivables will be uncollectible (assume a zero balance in the allowance). (b) By what amount would income before taxes differ if bad debt expense was computed using the percentage-of-receivables approach? Net income would be $ under the percentage-of-receivables approach.

Wildhorse follows the policy of debiting Bad Debt Expense as accounts are written off. The chief accountant maintains that this procedure is appropriate for financial statement purposes because the Internal Revenue Service will not accept other methods for recognizing bad debts. All of Wildhorse's sales are on a 30-day credit basis. Sales for the current year total $2,200,000. The balance in Accounts Receivable at year-end is $87,100 and an analysis of customer risk and charge-off experience indicates that 12% of receivables will be uncollectible (assume a zero balance in the allowance). (b) By what amount would income before taxes differ if bad debt expense was computed using the percentage-of-receivables approach? Net income would be $ under the percentage-of-receivables approach.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 4PB: Bristax Corporation recorded $1,385,660 in credit sales for the year, and $732,410 in accounts...

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