Manning Company uses the percentage of receivables method for recording bad debts expense. At the end of the year (before adjust
ment), the Allowance for Doubtful Accounts has a credit balance of $2,000 and accounts receivables has a balance of $1,000,000. Management estimates that 2% of credit sales will be uncollectible. What is the balance in the Allowance for Doubtful Accounts after adjustment? Select one: a. $24,000 b. $20,000 c. $22,000 d. $23,000 e. None of the above
1 answer:
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Answer:
$3,412
Explanation:
The computation of the economic order quantity is shown below:
=
=
= 2,954 units
The carrying cost is
= $15.40 × 15%
= $2.31
The number of orders would be equal to
= Annual demand ÷ economic order quantity
= 120,000 ÷ 2,954 units
= 40.62 orders
Now The total cost of ordering cost is
Ordering cost = Number of orders × ordering cost per order
= 40.62 orders × $ 84
= $3,412