Margrett Company has credit sales of $2.2 million for year 2009. At December 31, 2009, t...

Margrett Company has credit sales of $2.2 million for year 2009. At December 31, 2009, the company’s

Allowance for Doubtful Accounts has an unadjusted debit balance of $2,800. Margrett prepares a schedule

of its December 31, 2009, accounts receivable by age. On the basis of past experience, it estimates the percent

of receivables in each age category that will become uncollectible. This information is summarized here.

Required

1. Compute the required balance of the Allowance for Doubtful Accounts at December 31, 2009, using

the aging of accounts receivable method.

2. Prepare the adjusting entry to record bad debts expense at December 31, 2009.

Analysis Component

3. On July 31, 2010, Margrett concludes that a customer’s $3,455 receivable (created in 2009) is uncollectible

and that the account should be written off. What effect will this action have on Margrett’s 2010 net income? Explain.