Using an income statement approach (e.g., percentage of credit sales method), what do you think is an appropriate amount of bad debt expense and allowance for bad debts in 1999? (please explain your answers and show your math)

Summary Financial Data (in millions) 1995 1996 1997 1998 1999 $31,133 3,702 34,835 $33,752 $36.649 $36,957 $36.728 4,313 4,925 4,618 4,343 38,064 41,574 41,575 41,071 Revenues Merchandise sales and services Credit card interest income Total revenues Expenses Cost of sales, buying and occupancy Selling and administrative Provision for uncollectible accounts Other Total costs and expenses Operating income Other income, net Income tax provision Discontinued operations, net of tax Net Income 23,160 7,428 589 1,953 33,130 1,705 23 703 (776) $1,801 24,889 8,059 971 2,062 35,981 2,083 22 26,985 8,394 1,532 2,669 39,580 1,994 106 912 27.444 8,384 1,287 2,605 39.720 1,855 (41) 766 27,212 8,418 871 2,157 38,658 2,413 (56) 904 834 $1,271 $1,188 $1,048 $1,453 | 1997 1998 1999 1995 1996 Assets Cash and cash equivalents $ 606 $ 660 Credit card receivables 20,925 20,104 Allowance for uncollectible accounts (819) (801) Net credit card receivables 20,106 19,303 Other current assets 5,729 8,484 Property and equipment, net 5,077 5,878 Other assets 1,612 1,842 $ 358 20,956 (1,113) 19,843 10,042 6,414 2,043 $ 495 18,946 (974) 17,972 10,804 6,380 2,024 $ 729 18,793 (760) 18,033 9,905 6,450 1,837 Total Assets $33,130 $36.167 $38.700 $37,675 $36,954 Liabilities Current liabilities Long-term liabilities Total liabilities $14,607 14,138 28,745 $14,950 16,272 31,222 $15.790 $14,222 17,048 17,387 32,838 31,609 $13,701 16,414 30,115 Shareholders' equity 4,385 4,945 5,862 6,066 6,839 Total Liabilities and Equity $33,130 $36,167 $38.700 $37,675 $36,954 Analysis of Allowance for Uncollectible Accounts 1995 1996 1997 1998 1999 $ 808 $ 819 $ 801 $1,113 $974 Allowance, beginning of year Provision for uncollectible accounts Net credit losses (wite-offs) 589 971 1,532 1,287 871 (578) (989) (1,220) (1,426) (1,085) Allowance, end of year $ 819 $ 801 $1,113 $ 974 $ 760 Key Credit Portfolio Information Sears Card sales as a % of sales 1995 56.6% 1996 56.6% 1997 55.1% 1998 51.6% 1999 47.9% 5.8% 2.3% 1.1% 1.8% 3.8% 4.4% 4.4% 5.2% Comparable store sales growth (%) 4.7% Merrill Lynch Broadline Retailers Index of comparable store sales growth (%) 2.0% Average account balance ($) S 914 Delinquency rates (%) 4.16% Net credit charge-offs to average credit card receivables 2.77% S 977 $1,058 $1,076 $1,121 5.40% 7.00% 6.82% 7.58% 5.02% 6.23% 7.54% 6.03% Summary Segment Data 1995 1996 1997 1998 1999 Operating Income Retail Services Credit International Corporate Consolidated NA NA NA NA NA $ 841 305 1,164 (11) (216) $ 951 361 752 142 (212) $ 382 375 1,144 165 (211) $ 841 329 1,347 218 (322) $ 1,705 $ 2,083 $ 1,994 $ 1.855 $ 2.413 The summary segment data shown above are from the 1998 and 1999 Sears Annual Reports, and are provided in accordance with SFAS No. 131. Disclosures About Segments of an Enterprise and Related Information." SFAS 131 was effective for fiscal years beginning after December 15, 1997, with prior year information in those financial statements reported in conformance with the new standard. The first time Sears was required to report this data was in its 1998 Annual Report. Accordingly, segment information under the new standard is not available for 1995. The 1997 Annual Report states "the Company operates primarily in the retailing industry," and gives the following segment information: 1995 1996 1997 Operating Income Domestic International $ 1.729 (24) $ 2,094 (11) $1,852 142 Consolidated $ 1,705 $ 2.083 $1,994