Kelly's Collectibles 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, Kelly's Collectibles 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 if there appears to be a significant change in the loss rate over time.
3. If credit sales for 2010 are $373,000, explain 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 Credit Sales $205,000 185,000 209,000 253,000 $852,000 Losses from Uncolle ctible Accounts $15,527 11,692 14,184 21,933 $63,336