Question

During its first year of operations, Mack's Plumbing Supply Co. had sales of $580,000, wrote off $9,300 of accounts as uncollectible using the direct write-off method, and reported net income of $63,800. Determine what the net income would have been if the allowance method had been used, and the company estimated that 2.5% of sales would be uncollectible. $ fill in the blank 1

Answer 1

Answer: $58600

Explanation:

The net income that would have been if the allowance method had been used, and the company estimated that 2.5% of sales would be uncollectible will be calculated thus:

= Reported net income + Uncollectible - (Sales × % Uncollectible)

= $63800 + $9300 - ($580000 × 2.5%)

= $63800 + $9300 - $14500

= $58600