Question

A firm reported sales of $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectible accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts forA) $1,200B) $1,500C) $1,800D) $3,0008.

Answer 1

Answer:

A) $ 1,200

Explanation:

The firm has estimated that one half of one percent of credit sales is uncollectible.

Total credit sales                                                                              $ 300,000

Estimated uncollectible accounts                                                           0.5 %

Allowance for uncollectible accounts balance        

$ 300,000 * 0.5 %                                                                             $      1,500

Available balance in allowance for uncollectible account             $       300

Additional amount to be recorded in allowance account               $     1,200