Question

Nancy Company has a balance of $15,000 in accounts receivable on December 31, of which $1,500 is more than 30 days overdue. The company has a beginning debit balance of $45 in the Allowance for Doubtful Accounts. They estimate the uncollectible accounts to be 1% of current accounts and 10% of accounts over thirty days. The adjusting entry on December 31 will include: A) $285 credit to Allowance for Doubtful Accounts B) $240 debit to Bad Debts Expense C) $195 debit to Bad Debts Expense D) $285 Debit to Allowance for Doubtful Accounts E) $330 credit to Allowance for Doubtful Accounts

Answer 1

Answer:

E. $330 credit to allowance for doubtful accounts

Explanation:

With regards to the above, the adjusting entry on December 31st is computed as;

= [($15,000 - $1,500)× 0.1)]

= $135

1% of the balance less than 30days

= $1,500 × 0.1 = $150

Total = $45 + $135 + $150 = $330