Session 4 Problem 1 2008 2009 2010 2011 Sales $ 125,000 $ 180,000 $ 250,000 $ 280,000 Credit Sales 90,000 158,000 210,000 235,000 Collections on

Session 4 Problem 12008 2009 2010 2011Sales $ 125,000 $ 180,000 $ 250,000 $ 280,000Credit Sales 90,000 158,000 210,000 235,000Collections on accounts receivable2008 Sales 78,000 8,500 2002009 Sales 137,000 15,000 3002010 Sales 178,800 19,5002011 Sales 200,000Accounts receivable written off2008 accounts 2,500 500 300 -2009 accounts 4,600 700 4002010 accounts 6,200 1,0002011 accounts 6,800Required:3. What amount should Michel record as bad debts expense for 2011 if:a. Bad debts are estimated as a percentage of credit sales?b. Allowance for doubtful accounts is estimated as a percentage of outstanding year-end accounts receivable?In 2011, three years after it began operations, Michel Enterprises decided to change from the direct write-off method of recording bad debts toestimating bad debts. The following information is available to you:Year1. Prepare an analysis to determine Michel’s estimated bad debt expense percentage based upon the average relationship of actual bad debtsto credit sales.2. Prepare an analysis to determine Michel’s estimated percentage of allowance for doubtful accounts based on year-end accounts receivable.Page 1 of 1

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