Evaluation of Allowance for Uncollectibles Talvez Company started business on January 3, 2001. The cempany made credit sales of $800,000 during 2001 and received payments of $410,000 prior to the end of the year. It also wrote off as uncollectible $7,000 of its receivables when it learned the customer filed for bankruptcy. Other than the entry to write off the $7,000 of receivables, Talvez Company has made no entries relating to bad debt expense for the period. The industry average for bad debt expense for companies similar to Talvez Company is 2 percent of credit sales. If Talvez Company uses the allowance method of accounting for bad debts and adopts the industry percentage in estimating bad debt expense for 2001:

a. What should be the balance reported in the Allowance for Uncollectible Accounts at December 31, 2001?

b. What Accounts Receivable balance would be reported in the balance sheet at December 31, 2001?

c. Evaluate the reasonableness of the balance in the Allowance for Uncollectibles at December 31, 2001.