A company started the year with accounts receivable of $15,000 and an allowance

Question

A company started the year with accounts receivable of $15,000 and an allowance for uncollectible accounts of ($1,500). During this year, sales (on all account) were $110,000 and cash collections for sales amounted to $105,000. Also $1,000 worth of uncollectible accounts were specifically identified and written off. Then, at year end, the company estimated that 10% of ending accounts receivable would be uncollectible. a) what amount will be shown on the year-end income for bad debts expense? b) what is the balance in the allowance for uncollectible accounts after all adjustments have been made?

Explanation / Answer

Op Bal Acct Rx 15000 Add Sales 110,000 ------------------------- Total Acct Rx 125,000 Less Cash colelcted 105,000 Less Acct Rx written off 1,000 -------------------------------- CLosing Bal Acct Rx 14,000 a) what amount will be shown on the year-end income statement for bad debt expenses? Amt written off $1000 + Prov for Bad debt (10% of 14000) 1400 = $2400 b) what is the balance in the allowance for uncollectible accounts after all adjustments have been made? Opening Bal Allow For Bad debt ($1500) Less Amt written off ($1000) Less Prov for Bad debt (10% of 14000) (1400) ----------------------------------------------- Closing Bal ($3900)

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