B-07.06Feb$480 000$80 000Morrison Supply sells pressured air devices that assist patients with breathing disorders during sleep. These devices are delivered to patients immediately upon completion of a diagnostics exam, and are subsequently billed to insurance companies. Insurance companies sometime refuse to pay and/or only agree to a reduced price. Patients are then responsible for any amount denied by the insurance company, but are often unable or unwilling to pay. Because clinical standards of cleanliness must be maintained, Morrison is unable to accept returns for resale to others. Morrison is reluctant to litigate to collect unpaid amounts. As a result, Morrison experiences a high rate of uncollectible accounts, and prepares a monthly adjusting entry for uncollectibles that is equal to 20% of sales. Morrison's Monthly sales and write-offs for the first quarter of 20X7 follow:MONTHSALESACTUAL WRITE-OFFSJan.$630,000$100,000Feb.,,Mar.$590,000$140,000(a)
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