Ultra Leather Products sells leather clothing at both wholesale and retail. The company has found that there is a higher rate of uncollectible accounts from retail credit sales than from wholesale credit sales.
Ultra computes its estimate loss from uncollectible account at the end of the year. The amount is based on the rates of loss that the firm has developed from experience for each division. A separate computation is made for each of the two types of sales. The firm uses the percentage of net credit sales method. As of December 31 , 2010 Accounts Reseivable has a balance of $392,000, and allowance for Doubtful Accounts has a debit balance of 326.80. The following table provides a breakdown of the credit sales for the year 2010 and the estimate rate of loss. Category Amount Estimate rate of loss Whole sale $2,040,000 0.5% Retail 548,600 1.2% Instruction 1. Compute the estimate amount of uncollectible accounts expence for each of the two categories of net credit sales for the year.