Question

Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case.
(a) Credit balance of $300 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates uncollectible receivables of $8,500.
(b) Credit balance of $500 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 2% of credit sales, which totaled $1,000,000 for the year.

Answer 1

Answer:

a. Credit balance in the Allowance for Doubtful Accounts and already balance in Allowance account = $300

Estimated Doubtful accounts and balance maintained with Allowance for Doubtful Accounts= $8,500

Amount added to the Allowance for Doubtful Accounts = $8,500 - $300

Amount added to the Allowance for Doubtful Accounts = $8,200

Ending balance maintained with Allowance for Doubtful Accounts = $8,500

b. Credit balance in the Allowance for Doubtful Accounts and already balance in Allowance account = $500

Estimated Doubtful accounts and balance maintained with Allowance for Doubtful Accounts = $1,000,000 * 2% = $20,000

Ending balance maintained with Allowance for Doubtful Accounts = $20,000 + $500 = $20,500