Reference no: EM132089136

Question - Company A begins Year Two with accounts receivable of $200,000 and an allowance for doubtful accounts of $10,000 (credit balance). Company Z had the exact same balances. During Year Two, Company A made credit sales of $700,000 and cash collections on those accounts of $500,000. Uncollectible accounts of $19,000 were written off during the year. However, one of these accounts ($5,000) was actually collected later in the year (for convenience, that $5,000 collection was not included in the $500,000 figure above). Company Z has exactly the same transactions. In fact, the operations of these two companies are exactly the same. Officials for Company A anticipate that 2 percent of credit sales will prove uncollectible. As a result of this information (and other transactions), Company A reported net income of $100,000. Officials for Company Z believe that 5 percent of ending accounts receivable will prove to be uncollectible. What net income will Company Z report?