on January 1, 1996. The company reported the fol¬

lowing selected items in the 1997 financial report.

1997 1996 Gross sales $1,400,000 $1,500,000 Accounts receivable 600,000 650,000 Actual bad debt write-offs 22,000 10,000 nr Arlington estimates bad debts at 2 percent of gross sales.

REQUIRED:

Analyze the activity in the “Allowance for Doubtful Accounts” T-account, and comment on whether the bad debt estimate has been sufficient to cover the write-offs.