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Diano4ka-milaya [45]
3 years ago
8

Net credit sales for the month are $4,000,000 for Marx Clothiers. Its accounts receivable balance is $160,000. The allowance is

calculated as 7.5% of the receivables balance using the percentage of receivables basis. The Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment. How much is the balance of the allowance account after adjustment?
Business
1 answer:
AnnyKZ [126]3 years ago
4 0

Answer:

Credit balance of $12,000

Explanation:

To calculate the balance of the allowance for doubtful accounts we need to multiply the total accounts receivable times the percentage of estimated bad debts:

$160,000 x 7.5% = $12,000

Since allowance for doubtful accounts is a contra asset account, when it increases it should be credited.

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