Question

Roster co. adjusts its allowance for doubtful accounts at year end. the general ledger balances for the accounts receivable and the related allowance account before adjustment were $1,500,000 and $45,000, respectively. roaster uses the percentage-of-receivable method to estimate its allowance for doubtful accounts. accounts receivable were estimated to be 4% uncollectible. what amount should roaster record as an adjustment to its allowance for doubtful accounts at year end?

Answer 1

With an accounts receivable balance of $1,500,000 and accounts receivables estimated to be 4% uncollectible, Roster Co.'s year-end doubtful accounts allowance should be $60,000. Since the current general ledger balance for the allowance account is only $45,000, Roster Co. should record an adjustment of $15,000 to bring it up to $60,000.