Jacobian Steel Manufacturing sells bulk steel products for maritime construction. The company has used the allowance method

Question:

Jacobian Steel Manufacturing sells bulk steel products for maritime construction. The company has used the allowance method for estimated bad debts for several years. Specifically they estimate that 6% of credit sales will go bad each year. Over the past several years, Jacobian has seen that year-end allowance account has a debit balance before adjustment. The company wants an in-depth analyzes of bad debts and a determination as to which method to use. You have been hired to perform the study.
During your review of their financial records, the following data becomes available.
Credit sales

Year Total Sales % on credit 2003 2004 2005 $1,000,000 $1,800,000 60% 70% $2,000,000 75%

Write offs

Year Bad debts written off 2003 2004 2005 $52,000 $96,000 $60,000

Allowance balance on December 31, 2005 before adjustment

Aging of Accounts Receivable

Considering also using percentage of accounts receivable balance to compute estimated uncollectible for period. Jacobian considers using 12%.
Accounts Receivable Balance:

Which method should they use and why?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...