The Fallbrook 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 the Fallbrook Company used an allowance method of recognizing credit losses and provided for such losses at the rate of one percent of credit sales, what amounts of accounts receivable and the allowance for doubtful accounts should appear on the firm's balance sheet at the end of 2020? What total amount of bad debts expense should appear on the firm's income statement during the three-year period?

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

Transcribed Image Text:

Year 2018 Sales $1,602,000 Collections Accounts Written Off $1,466,000 2019 1,752,000 1,728,000 $10,600 12,500 2020 2,050,000 1,876,000 14,000