Question

Financial information for CNG Inc. follows:

 

2009

2008

2007

Credit sales

$ 205,000

$ 200,000

$ 180,000

Actual bad debt write-offs

11,000

10,000

6,000

The company estimate bad debt for financial reporting purposesat 3 percent of credit sales. The balance in Allowance for DoubtfulAccounts as of January 1, 2007, was $10,000.

Compute the balance in Allowance for Doubtful Accounts as ofDecember 31, 2009 and comment on the sufficiency of the bad debtexpense and allowance over the three-year period. How did you cometo your conclusion?

 

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