Question

At December 31, Tremble Music had account balances in Accounts Receivable of $300,000 and in Allowance for Uncollectible Accounts of $1,000 (debit) before any adjustments. An analysis of Tremble's December 31 accounts receivable suggests that 5% of the account balances are not expected to be collected. The balance of Allowance for Uncollectible Accounts after adjustment will be:___________
A. $1,000
B. $16,000
C. $14,000
D. $15,000

Answer 1

Answer:

The correct option is D,$15000.

Explanation:

The new computed allowance for uncollectible accounts in the current year is 5% of accounts receivable.

The new allowance is computed thus:

new allowance for uncollectible accounts=5%*$300000

                                                                     =$15000

Hence the balance of allowance in the uncollectible accounts after adjustment is $15000

The balance in the allowance for uncollectible accounts at the end of the period  is usually the newly computed allowance for uncollectible accounts.

In this case it is $15000