The Allowance for Uncollectible Accounts has a credit balance of $2,000 prior to the end-of-month adjustment....
The Allowance for Uncollectible Accounts has a credit balance of $2,000 prior to the end-of-month adjustment. Sales on credit for the month were $1,000,000. Past experience indicates that 2.5 percent of the month’s credit sales will become uncollectible. Alternatively, an aging of Accounts Receivable accounts shows an estimated total of all uncollectible accounts receivable to be $30,000.
Using the percentage of credit sales method, the Allowance for Uncollectible Accounts should be credited for:
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a. $27,000. |
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b. $2,000. |
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c. $25,000. |
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d. $23,000. |
Homework Answers
Uncollectible accounts as per percentage method
= 1,000,000*2.5%
= $25,000
Allowance for uncollectible accounts has a credit balance of $2,000 already.
Therefore the credit balance of allowance for uncollectible account is already been recorded and therefore the difference between the the uncollectible accounts and credit balance of allowance for uncollectible account should be recorded in the credit side of allowance for uncollectible accounts.
Therefore Allowance for uncollectible accounts should be credited by
= 25,000 - 2,000
= $23,000
Therefore the correct option is D
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