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Bezzdna [24]
3 years ago
11

Allegheny Company ended 2015 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $23,000 and $900, respe

ctively. During 2016, Allegheny wrote off $1,500 of Uncollectible Accounts. After aging its receivables, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $1,600. What will Allegheny report as Uncollectible Accounts Expense on its 2016 income statement
Business
1 answer:
solniwko [45]3 years ago
6 0

Answer:

Allegheny should report as $2,200 as Uncollectible Accounts Expense on its 2016 income statement.

Explanation:

Allegheny determines its bad debt expense by aging its receivables.

The write-off during 2016 would have this effect:

Debit Allowance for doubtful accounts                    $1,500

Credit Accounts receivable                                       $1,500

<em>(To record write-off during 2016)</em>

The balance in the allowance for doubtful accounts would be $900 - $1,500 = $600 Debit

To reinstate the Allowance account to the estimated amount of $1,600, we need to add back the debit balance to arrive at $1,600 + $600 = $2,200.

The net realizable value of the Accounts receivable becomes: $23,000 - $1,500 - $1,600 = $19,900

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