Question

Company uses the​ percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to ​, and management estimates ​% will be uncollectible. The amount of expense to report on the income statement was . The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of . The balance of Allowance for Uncollectible​ Accounts, after​ adjustment, will be

Answer 1

Complete Question:

Company uses the​ percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to ​$500,000, and management estimates 2% will be uncollectible. The amount of expense to report on the income statement was $8,000. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $2,000. The balance of Allowance for Uncollectible​ Accounts, after​ adjustment, will be

Answer:

The balance of Allowance for Uncollectible​ Accounts, after​ adjustment, will be

$10,000

Explanation:

a) Data and Calculations:

Net credit sales = $500,000

Uncollectible estimate = 2% of net credit sales

Uncollectible Accounts expense = $8,000

Allowance for Uncollectible Accounts = $2,000 before adjustment

Allowance for Uncollectible after adjustment = $500,000 * 2% = $10,000