Question

nework Chapter #5 A Submitted At the beginning of 2021, Brad's Heating & Air (BHA) has a balance of $24,900 in accounts receivable. Because BHA is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of 2021, BHA wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that BHA now will need to use the allowance method. The following transactions occur during 2021 and 2022 1. During 2021, install air conditioning systems on account, $179,000. 2. During 2021, collect $174,000 from customers on account 3. At the end of 2021, estimate that uncollectible accounts total 10% of ending accounts receivable. 4. In 2022, customers' accounts totaling $6,900 are written off as uncollectible. Exercise 5-13A Part 1 Required: 1. Record each transaction using the allowance method. (If no entry is required for a particular transaction/event, select "No Jou Entry Required in the first account field.) Credit General Journal No Transaction Debit 179,000 Accounts Receivable Service Revenue 179.000 174,000 NE Cash Accounts Receivable 174,000 2.990 2,990 Bad Debt Expense Allowance for Uncollectible Accounts 6.900 Allowance for Uncollectible Accounts Accounts Receivable 8 < Prev 9 10 of 17 # No experience? And by the way, welcome back
Can someone explain to me where the $2990 in part 3) came from? where they got it?

Answer 1

Ending balance in Accounts receivable (2021) = Beginning balance + On account sales – Collections = $24,900 + $179,000 - $174,000 = $29,900

Uncollectible accounts = 10% of ending accounts receivable = 10% x $29,900 = $2,990.