The Atlas Tile Company has an accounts receivable balance at December 31 of

$376,000. Its allowance for uncollectible accounts, before adjustment, has a balance of $37,000. Credit sales for Atlas, for the year just ended, were $2,700,000.

Using its credit history,Atlas decides to increase its allowance account by 3% of credit sales.

Required

a. Calculate the allowance for uncollectible accounts as a percentage of the accounts receivable ratio, both before and after the 3% adjustment was made.

b. Now assume that the firm’s auditors have conducted an aging analysis and recommend that the allowance account balance be increased to $96,000.Recalculate the allowance for uncollectible accounts as a percentage of accounts receivable ratio after this alternative adjustment has been made.

c. Compare and contrast these results.