Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 10

A local phone company had a customer who rang up $300 in charges during September 2012 but did not pay. Despite reminding the customer of this balance, the company was unable to collect in October, November, or December. In March 2013, the company finally gave up and wrote off the account balance. What amount of Sales, Bad Debt Expense, and Net Income would the phone company report from these events in 2012 and 2013 if it used the allowance method of accounting for uncollectible accounts Assume the company estimates 5 percent of credit sales will go bad.