The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $3,000.Net sales for the year were $500,000.In the past,3 percent of sales have proved uncollectible,and an aging of accounts receivable resulted in an estimate of $20,000 of uncollectible accounts receivable.
-Using the percentage of net sales method,the Allowance for Uncollectible Accounts balance (after adjustment)would be
A)$12,000.
B)$15,000.
C)$18,000.
D)$20,000.

Question

The general ledger account for Accounts Receivable shows a debit balance of $50,000.Allowance for Uncollectible Accounts has a credit balance of $3,000.Net sales for the year were $500,000.In the past,3 percent of sales have proved uncollectible,and an aging of accounts receivable resulted in an estimate of $20,000 of uncollectible accounts receivable. 
-Using the percentage of net sales method,the Allowance for Uncollectible Accounts balance (after adjustment)would be
A)$12,000.
B)$15,000.
C)$18,000.
D)$20,000.

Quizplus · Accepted Answer

Using the percentage of net sales method, we calculate the estimated uncollectible accounts as follows:
3% of $500,000 net sales = $15,000
So, the total estimated uncollectible accounts are $15,000 + $20,000 (from aging of accounts receivable) = $35,000.

To adjust the allowance for uncollectible accounts, we need to increase the credit balance by $32,000 ($35,000 - $3,000 current credit balance). Therefore, the adjusted balance for the Allowance for Uncollectible Accounts would be $18,000 ($15,000 + $3,000).

Thus, the best choice is (C) $18,000.

The General Ledger Account for Accounts Receivable Shows a Debit