Penny Cookie Company offers credit terms to its customers. At the end of Year 1, accounts receivable totaled $120,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $12,000 at the beginning of Year 1 and $6,200 in receivables were written off during the year as uncollectible. Also, $600 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 6% to accounts receivable at the end of the year.

1. (NOT REQUIRED) Prepare journal entries to record the write-off of receivables, the collection of $600 for previously written off receivables, and the year-end adjusting entry for bad debt expense.(NOT REQUIRED)

2. (ANSWER THIS) What numbers are used to calculate the ending balance of allowance for doubtful accounts? (ANSWER THIS)