A large corporation recently reported the following amounts on its year-end balance sheets:
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2007
|
|
2008
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Accounts receivable
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$8,400,000
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$8,800,000
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Allowance for doubtful accounts
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95,000
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105,000
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A footnote to these statements indicated that the company uses a percentage of its credit sales to determine its bad debts expense, that $60,000 of uncollectible accounts had been written off during 2007 and $ 800,000 of uncollectible accounts had been written off in 2008, and that there had not been any recoveries of accounts written off.
a.Determine the amount of bad debts expense that must have been recorded by the company for 2008.
b.How were the company's net receivables affected by the write-off of the $ 800,000 of accounts in 2008?
c.How was the company's net income affected by the $800,000 write-off of accounts during 2008?