Question

On January 1, Year 2, Grande Company had a $69,600 balance in the Accounts Receivable account and a $2,600 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $183,000 of service on account. The company collected $215,500 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is:_______

Answer 1

The amount of uncollectible accounts expense recognized on the Year 2 income statement is  $1,830.

Explanation:

• On January 1, Year 2, Grande Company had balance = $69,600 in the Accounts Receivable account

• Grande provided services = $183,000

• The Allowance for Doubtful Accounts account = $2,600
• The company collected  cash from accounts receivable = $215,500
• Uncollectible accounts are estimated to be =  1% of sales on account
• Thus, following calculation gives the desired result,
• Multiply amount of Grande services with 1% sales on account.
• i.e : $183,000 sales on account × 1% = $1,830
• So, the amount of uncollectible accounts expense is $1,830 as the income statement for the 2nd year.
• The reserves are recorded when, the uncollectible accounts expense are debited and credit the allowance for the uncollectible accounts.
• There are many reasons for the uncollectible accounts such as,
• the debtor's bankruptcy,
• the inability to get the debtor,
• fraud, etc