Step 1 Search the following.

For several years, Xtreme Co.'s sales have been on a cash only basis. On January 1, 2013, however, Xtreme Co. began offering credit on terms of n/30. The amount of the adjusting entry to record the estimated uncollectible receivables at the end of each year has been of 1% of credit sales, which is the rate reported as the average for the industry. Credit sales and the year-end credit balances in Allowance for Doubtful Accounts for the past four years are as follows:

Laurie Jones, president of Xtreme Co., is concerned that the method used to account for and write off uncollectible receivables is unsatisfactory. She has asked for your advice in the analysis of past operations in this area and for recommendations for change.

Year Credit Sales Allowance for Doubtful Accounts

2013 4,000,000 5,000

2014 4,400,000 8,250

2015 4,800,000 10,200

2016 5,100,000 14,400

Step 2 Post to the discussion board.

Respond to the following questions and, if appropriate, include personal experience as part of your answers.

Determine the amount of (a) the addition to Allowance for Doubtful Accounts and (b) the accounts written off for each of the four years.

Advise Laurie Jones as to whether the estimate of of 1% of credit sales appears reasonable.

Assume that after discussing with Laurie Jones, she asked you what action might be taken to determine what the balance of Allowance for Doubtful Accounts should be at December 31, 2016, and what possible changes, if any, you might recommend in accounting for uncollectible receivables. How would you respond?