Co. uses the tage of credit sales method to estimate bad debts. Based on past ex

Question

Co. uses the tage of credit sales method to estimate bad debts. Based on past experience Scrooge Co. estimates that 4% of its credit sales will be uncollectible. Scrooge's total sales for the year were $3,200,000 and $2,000,000 of the total sales were credit sales. During the year, Scrooge wrote off $3 2,000 of uncollectible accounts. Scrooge's allowance for uncollectible accounts had a $8,000 credit balance on January 1. In its December 31 balance sheet, what amount should Scrooge Co. report as Allowance for Uncollectible Accounts? $124,000 $80,000 O $104,000 O $56,000o o $76,000

Explanation / Answer

Opening balance In allowance for Uncollectible account      =    $8000

Less: Bad debt written off                                                      =   $32,000

Add: Bad Debt estimated on sales (2000000*0.04)              =   $80,000

Amount that should be reported as Allowance for Uncollectible accounts in balance sheet = 8000-32000+80000   = $56,000 Answer

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