AVERAGE UNCOLLECTIBLE ACCOUNT LOSSES AND BAD DEBT EXPENSE The accountant for Porile Company prepared the following data for sales and losses from uncollectible accounts:

Year Credit Sales Losses from Uncollectible Accounts*

2005 $514,000 $ 7,710 2006 582,000 9,312 2007 670,000 10,385 2008 772,000 11,966

*Losses from uncollectible accounts are the actual losses related to sales of that year

(rather than write-offs of that year).

required:

. Calculate the average percentage of losses from uncollectible accounts for 2005 through 2008.

. Assume that the credit sales for 2009 are $874,000 and that the weighted average percentage calculated in (1) is used as an estimate of losses from uncollectible accounts for 2009 credit sales. Determine the bad debt expense for 2009 using the credit sales method.

Exercise