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 accounts receivable aging method,the entry to record Uncollectible Accounts Expense would be:
A)Uncollectible Accounts Expense 21,500 Allowance for Uncollectible Accounts 21,500
B)Uncollectible Accounts Expense 17,000 Allowance for Uncollectible Accounts 17,000
C)Allowance for Uncollectible Accounts 20,000 Uncollectible Accounts Expense 20,000
D)Allowance for Uncollectible Accounts 23,000 Uncollectible Accounts Expense 23,000

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 accounts receivable aging method,the entry to record Uncollectible Accounts Expense would be:
A)Uncollectible Accounts Expense 21,500 Allowance for Uncollectible Accounts 21,500
B)Uncollectible Accounts Expense 17,000 Allowance for Uncollectible Accounts 17,000
C)Allowance for Uncollectible Accounts 20,000 Uncollectible Accounts Expense 20,000
D)Allowance for Uncollectible Accounts 23,000 Uncollectible Accounts Expense 23,000

Quizplus · Accepted Answer

The accounts receivable aging method estimates the amount of uncollectible accounts based on the age of the accounts receivable. In this case, the aging estimate is $20,000. To adjust the allowance for uncollectible accounts to this estimate, we need to calculate the current balance of the allowance for uncollectible accounts.

Beginning balance of the allowance for uncollectible accounts: $3,000
Add: Estimated uncollectible accounts from aging analysis: $20,000
Less: Current balance needed: $16,000 ($50,000 x 3%)

Therefore, the amount of adjustment to the allowance for uncollectible accounts is $13,000 ($16,000 - $3,000). This means that the entry to record Uncollectible Accounts Expense would be:

Uncollectible Accounts Expense $17,000
Allowance for Uncollectible Accounts $17,000

Option B is the correct answer.

The General Ledger Account for Accounts Receivable Shows a Debit