Problem 4: Receivables and Bad Debt Expense SDLI, Inc. grants its customers 30 days credit. The company uses the allowance method for its uncollectible accounts receivable.During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly.

At the end of 2015, accounts receivable were $1,250,000 and the allowance account had a credit balance of $106,000. Accounts receivable activity for 2016 was as follows:

Beginning balance $1,250,000

Credit sales 3,800,000

Collections (3,745,000)

Write-offs (82,000)

Ending balance $1,223,000

The companys controller prepared the following aging summary of year-end accounts receivable: