Question

Milo Company uses the​ percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $ 150 comma 000​, and management estimates 4​% will be uncollectible. Milo ​Company's balance of Allowance for Uncollectible Accounts after​ adjustments, was $ 5 comma 000. The following​ year, Milo Company wrote off $ 3 comma 000 of old receivables as uncollectible. What is the balance in the Allowance account​ now?

Answer 1

Answer:

Revised balance = $8000

Explanation:

Milo Company uses the​ percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $ 150 comma 000​, and management estimates 4​% will be uncollectible.

Milo ​Company's balance of Allowance for Uncollectible Accounts after​ adjustments, was $ 5 comma 000.

The following​ year, Milo Company wrote off $ 3 comma 000 of old receivables as uncollectible.

The Allowance account​ balance now will be:

Amount of Uncollectible Accounts for the year = 4% x $150,000 = $6000

Previous balance is $5,000 less amount written off $3000 = $2000

Revised balance = $6,000 + $2000 which is $8000