Accounting for uncollectibles over three periods
Albertson”s Locksmith Corporation started operations on January 1, 2010. Albertson”s estimates uncollectibles using the percentage-of-credit-sales method. The following information pertains to the company”s sales, receivables, and collections for the first three years of operation:
|
2012 |
2011 |
2010 |
|
|
Credit sales |
$240,000 |
$190,000 |
$105,000 |
|
Cash sales |
8,000 |
4,000 |
1,000 |
|
Total sales |
$248,000 |
$194,000 |
$106,000 |
|
Write-offs |
8,400 |
6000 |
3,000 |
|
Cash collections of A/R |
214,1100 |
161,0011 |
92,000 |
Albertson”s estimates uncollectible accounts at 4 percent of credit sales.
REQUIRED:
a. What is the balance of the allowance for uncollectibles account as of the end of 2010, 2011, and 2012?
b. What is the (net) balance of the accounts receivable account as of the end of 2010, 2011, and 2012?
c. Comment on Albertson”s annual estimates.