During its first year of operations, Mack’s Plumbing Supply Co. had net 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. Determine what the net income would have been if the allowance method had been used, and the company estimated that 1% of net sales would be uncollectible.
Answer:
$482,800 [$487,500 + $27,800 – ($3,250,000 × 1%)]