Question

Rush Corp. has outstanding accounts receivable totaling $500,000 as of December 31 and sales during the year of $250,000. There is also a debit balance of $20,000 in the allowance for uncollectible accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense

Answer 1

Answer:

$20,000

Explanation:

Calculation for what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense

Using this formula

Balance in the allowance for doubtful accounts=

(Outstanding Accounts Receivable

* Percentage uncollectible)- Eebit balance of in the allowance for uncollectible accounts.

Let plug in the formula

Balance in the allowance for doubtful accounts=($500,000*8%)-$20,000

Balance in the allowance for doubtful accounts=$40,000-$20,000

Balance in the allowance for doubtful accounts=$20,000

Therefore the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense is $20,000