Question

Gross Accounts Receivable is $12,000. Allowance for Doubtful Accounts has a credit balance of $600. Net sales for the year are $100,000. In the past, 2% of sales had proved uncollectible, and an aging of the receivables indicates $1,900 as uncollectible. What would be the adjusted balance of the Allowance account under the balance sheet approach? A. $2,000 B. $1,400 C. $2,500 D. $1,900

Answer 1

Under the balance sheet approach, the adjusted balance of the Allowance for Doubtful Accounts should be based on the aging of the receivables. The aging of the receivables provides the amount of uncollectible receivable (ending balance). Therefore, the adjusting balance of ADA would be $1,900.