Question

Milford Company uses the​ percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $ 140 ,000​, and management estimates 2​% will be uncollectible. The amount of expense to report on the income statement was $ 2,800. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $ 3,000. The balance of Allowance for Uncollectible​ Accounts, after​ adjustment, will be

Answer 1

Answer:

The balance of Allowance for Uncollectible​ Accounts, after​ adjustment, will be $5,800

Explanation:

The computation of the balance of Allowance for Uncollectible​ Accounts is shown below:

= Estimated uncollectible amount + credit balance of Allowance for Uncollectible Accounts

= $2,800 + $3,000

= $5,800

The estimated uncollectible amount is shown below:

= Net credit sales × uncollectible percentage

= $140,000 × 2%

= $2,800

Both the items would be considered for computing the balance of the  Allowance for Uncollectible​ Accounts.