Allowance Method

Fullerton 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:

Year	Sales	Collections	Accounts Written Off
Year 1	$340,000	$287,000	$2,500
Year 2	425,000	380,000	3,390
Year 3	460,000	407,000	4,050

Required If Fullerton Company had used the allowance method of recognizing credit losses and had provided for such losses at the rate of 1.2 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 the third year? What total amount of bad debts expense would have appeared on the firm's income statement during the three year period?

Balance in Accounts Receivable at year end, Year 3

Answer