30. Comparing Methods for Uncollectible Receivables LO2, 3 The following data pertains to the operations of...

Transcribed Image Text:

30. Comparing Methods for Uncollectible Receivables LO2, 3 The following data pertains to the operations of Knight Corporation for 2012: Net credit sales $725,000 Net income (before bad debt expense) 135,000 Write-offs of uncollectible accounts 17,500 Estimated uncollectible percentage of net credit sales 3% The controller is trying to decide which method of accounting for bad debts to use. The company is attempting to maximize its net income to meet projected figures. The bad debt expense is material to the company's financial statements. Required a. Calculate bad debt expense for 2012 under the direct write-off method and the allowance method. b. Compute net income under both methods (assume a tax bracket of 30%). c. Does Knight have the option of which method to use under GAAP? 30. Comparing Methods for Uncollectible Receivables LO2, 3 The following data pertains to the operations of Knight Corporation for 2012: Net credit sales $725,000 Net income (before bad debt expense) 135,000 Write-offs of uncollectible accounts 17,500 Estimated uncollectible percentage of net credit sales 3% The controller is trying to decide which method of accounting for bad debts to use. The company is attempting to maximize its net income to meet projected figures. The bad debt expense is material to the company's financial statements. Required a. Calculate bad debt expense for 2012 under the direct write-off method and the allowance method. b. Compute net income under both methods (assume a tax bracket of 30%). c. Does Knight have the option of which method to use under GAAP?