Use the Information for the Question(s) Below

question 73

Multiple Choice

Use the information for the question(s) below.
Shepard Industries is evaluating a proposal to expand its current distribution facilities. Management has projected the project will produce the following cash flows for the first two years (in millions) .

-The incremental EBIT for Shepard Industries in year one is closest to:

• A) $360
• B) $750
• C) $595
• D) $510

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Definitions:

Direct Write-off Method

An accounting practice where uncollectible accounts receivable are directly written off against income at the time they are deemed uncollectible.

Uncollectible Receivables

Debts owed to a company that are considered impossible or highly unlikely to be paid, often written off as bad debt.

Bad Debt Expense

An estimated expense that represents the amount of receivables that a company does not expect to collect due to customers' inability to pay.

Allowance for Doubtful Accounts

An estimation of the amount of accounts receivable that may not be collectible, serving as a contra asset account.