Juniper Company was formed in 1993. Sales have increased on the average of 5% per year during its first ten years of existence, with total sales for 2002 amounting to $400,000. Since incorporation, Juniper Company has used the allowance method to account for uncollectible accounts receivable. On January 1, 2003, the company s Allowance for Bad Debts had a credit balance of $5,000. During 2003, accounts totaling $3,500 were written off as uncollectible.
Required
1. What does the January 1, 2003, credit balance of $5,000 in Allowance for Bad Debts represent?
2. Since Juniper Company wrote off $3,500 in uncollectible accounts receivable during 2003, was the prior year s estimate of uncollectible accounts receivable overstated?
3. Prepare journal entries to record:
a. The $3,500 write off of receivables during 2003.
b. Juniper Company s 2003 bad debt expense, assuming an aging of the December 31, 2003, accounts receivable indicates that potential uncollectible accounts at year end total $9,000.