Question

Allegheny Company ended 2015 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $58,000 and $2,700, respectively. During 2016, Allegheny wrote off $4,800 of Uncollectible Accounts. After aging its receivables, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $4,400. What will Allegheny report as Uncollectible Accounts Expense on its 2016 income statement?

Answer 1

Answer:

$6,500

Explanation:

Allowance for doubtful accounts is a reduction in the total amount of accounts receivable given in the company´s balance sheet. Such an allowance is actually and estimate from the management of the accounts receivables that it doesn´t expect to receive.

Ecuation:

Adjustment =  - Beginning balance + Write offs + Ending balance

Adjustment = ($2,700) + $4,800 + $4,400

Adjustment =  $6,500

The estimation of the write off from the previous year must be discounted, the added the write off registered during the year plus the estimate at the end of the period.