Juniper Company was formed in 2002. Sales have increased on the average of 5% per year during its first 10 years of existence, with total sales for 2011 amounting to $400,000. Since incorporation, Juniper Company has used the allowance method to account for uncollectible accounts receivable.

On January 1, 2012, the company’s Allowance for Bad Debts had a credit balance of $5,000. During 2012, accounts totaling $3,500 were written off as uncollectible.

Required:

1. What does the January 1, 2012, credit balance of $5,000 in Allowance for Bad Debts represent?

2. Since Juniper Company wrote off $3,500 in uncollectible accounts receivable during

2012, 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 2012.

b. Juniper Company’s 2012 bad debt expense, assuming an aging of the December 31, 2012, accounts receivable indicates that potential uncollectible accounts at year-end total $9,000.