QUESTION 1-A

The Rafi M. company, which has been in business for three years, makes all of its sales On credit and does not offer cash discounts. Credit sales, customer collections, and write oil's of uncollectible accounts for its first three years follow: Required: Rafi M. estimates uncollectibles to the 10% of accounts receivable (that is, it uses the balance sheet approach). Identify the ending balance amount on the accounts receivable and the allowance for uncollectible accounts reported on the balance sheet for each of the three years and the total amount of bad debt expense that appears on the income statement for each of the three years. Comment on the appropriateness of the 10% rate used by Rafi M. to provide for bad debts based on your results in part a above. A consultant suggested using the income statement approach for determination of bad debt expense. What percentage would yield the same balance for the allowance for uncollectible accounts at the end of 2012, as is under the currently used method? Peet's Coffee & Tea, Inc., is a specialty coffee roaster and marketer of branded fresh roasted whole bean coffee. It recently disclosed the following information concerning the Allowance for Doubtful Accounts on its Form 10-K Annual Report submitted to the Securities and Exchange Commission. A summary of the Allowance for Doubtful Accounts is as follows (dollars in thousands)