On January 31, 2018, Allowance for Doubtful Accounts has a credit balance of 25,000. During 2018,...
On January 31, 2018, Allowance for Doubtful Accounts has a credit balance of 25,000. During 2018, 32,000 of uncollectible accounts receivable were written off. Past experiences indicate that the allowance should be 10% of the balance in receivables. Net credit sales for 2018, $3,500,000. If the accounts receivable balance at December 31 was $360,000, what is a required adjustment to the Allowance for Doubtful Accounts at December 31, 2018?
A. $29,000
B. $36,000
C. $43,000
D. $6,000
Homework Answers
| Estimation of Bad Debts Expenses = 10% of Allowance for doubtful accounts = | $ 36,000 | |||
| (360,000 X 10%) | ||||
| Allowance for Uncollectable Accounts (Opening Bal.) | $ 25,000 | Credit | ||
| Less: Bad Debts Write off | $ 32,000 | Debit | ||
| Balance to be make provision for allowance for uncollectable accounts | $ 7,000 | Debit | ||
| Provision for the Allowance of Bad debts of the year= | $ 36,000 | |||
| Balance need to be provision for the year through allowance for doubtful accounts | $ 43,000 | |||
| IF there is write off amount is more than its allowance for doubtful accounts than the balance | ||||
| in allowance for doubtful is changed to debit balance | ||||
| Debit balance in allowance for doubtful account means we have to increase the provision for allowance to nullify the additional write off | ||||
| So, Answer = Option C = $ 43,000 | ||||
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