David Company, which has been in business for three years, makes all of its sales on account and does not offer cash discounts. The firm's credit sales, collections from customers, and write-offs of uncollectible accounts for the three-year period are summarized below:

Required

a. If David Company had used the allowance method of recognizing credit losses and had provided for such losses at the rate of 1.6 percent of credit sales, what amounts in accounts receivable and the allowance for doubtful accounts would appear on the firm's balance sheet at the end of 2020? What total amount of bad debts expense would have appeared on the firm's income statement during the three-year period?

b. Comment on the use of the 1.6 percent rate to provide for credit losses in part \(a\).

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Year Sales Collections Accounts Written Off 2018 2019 2020 $300,000 385,000 430,000 $287,000 390,000 $2,200 3,350 407,000 3,650