Bad debts over time
Financial information for CNG Inc. follows:
|
2012 |
2011 |
2010 |
|
|
Credit sales |
$205,000 |
$200,000 |
$180,000 |
|
Actual bad debt write-offs |
11,000 |
10,000 |
6,000 |
The company estimates bad debts for financial reporting purposes at 3 percent of credit sales. The balance in allowance for doubtful accounts as of January 1, 2010, was $10,000.
REQUIRED:
a. Provide the journal entries related to allowance for doubtful accounts for 2010, 2011, and 2012.
b. Compute the balance in allowance for doubtful accounts as of December 31, 2012.
c. Comment on the sufficiency of the bad debt expense and allowance over the three-year period. How did you come to your conclusion?