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Determine which of statements is true for andersen company

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The Andersen Company gets to the end of Year One and reports accounts receivable of $500,000 and credit sales for the period of $1.2 million. The ending allowance for doubtful accounts balance is a $1,000 debit balance as a result of the accounts written off for the year. Company officials have a choice of estimating bad debts as 4 percent of receivables or 2 percent of sales. Which of the following statements is true?

Option 1: If the percentage of sales method is selected, net income will be $2,000 lower than if the percentage of receivables method is selected

Option 2: If the percentage of sales method is selected, net income will be $4,000 lower than if the percentage of receivables method is selected

Option 3: If the percentage of sales method is selected, net income will be $1,000 lower than if the percentage of receivables method is selected

Option 4: If the percentage of sales method is selected, net income will be $3,000 lower than if the percentage of receivables method is selected

Reference no: EM132484482

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