EX 9-15 Effect of doubtful accounts on net income

During its first year of operations, Filippi’s Plumbing Supply Co. had net sales of $4,800,000, wrote off $65,000 of accounts as uncollectible using the direct write-off method, and reported net income of $375,000. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1½% of net sales would be uncollectible.

Answer:
$368,000 [$375,000 + $65,000 – ($4,800,000 × 1½%)]

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