Question

In 2022 the Splish Brothers Inc. had net credit sales of $1020000. On January 1, 2022, the Allowance for Doubtful Accounts had a credit balance of $23100. During 2022, $34200 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $242000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2022

Answer 1

Answer:

$35,300 (Credit)

Explanation:

Given that;

Allowance = 10% × $242,000 = $24,200

Amount written off of $34,200 would have made the balance in the allowance for doubtful debts

= $34,200 - $23,100

= $11,100 (Debit)

However, the balance in the account at the end of the year should amount to $24,200 hence the adjustment required

= $24,200 + $11,100

=$35,300 (Credit)