The Glass House, a glass and china store, sells nearly half its merchandise on credit. During the past four years, the following data were developed for credit sales and losses from uncollectible accounts:

In 2010, The Glass House expanded its line significantly and began to sell to new kinds of customers.

Required:
1. Calculate the loss rate for each year from 2006 through 2009.
2. Determine whether there appears to be a significant change in the loss rate over time.
3. If credit sales for 2010 are $392,000, determine what loss rate you would recommend to estimate bad debts.
4. Using the rate you recommend, record bad debt expense for2010.

Transcribed Image Text:

Year of Sales 2006 2007 2008 2009 Total Losses from Uncollectible Accounts $12,608 13,299 13,285 22,274 $61,466 Credit Sales $197,000 202,000 212,000 273,000 $884,000