Question: During its first year of operations, macks plumbing supply co. had sales of 3,250,000 wrote off 27,800 of accounts as uncollectible using the direct write-off method, and reported net income of 487,500. Assume that during the second year of operations mack plumbing supply co. had sales of 4,100,000 wrote off 34,000 of accounts as uncollectible using the direct write off method, and reported net income of 600,000
A. Determine what net income would have been in the second year if the allowance method (using 1% of sales) had been used in both the first and second years.
B. Determine what the balance of the allowance for doubtful accounts would have been at the end of the second year if the allowance method had been used in both the first and second years.