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At the end of March,the unadjusted trial balance of Tutor,Inc.included the following accounts:

-Tutor uses the balance sheet approach in estimating uncollectible accounts expense,and aging the accounts receivable indicates the estimated uncollectible portion to be $8,600.What is the amount of uncollectible accounts expense recognized in Tutor's income statement for March?
A)$8,600.
B)$6,800.
C)$10,400.
D)$1,800.

Question

[The following information applies to the questions displayed below.]
At the end of March,the unadjusted trial balance of Tutor,Inc.included the following accounts:
 
-Tutor uses the balance sheet approach in estimating uncollectible accounts expense,and aging the accounts receivable indicates the estimated uncollectible portion to be $8,600.What is the amount of uncollectible accounts expense recognized in Tutor's income statement for March?
A)$8,600. 
B)$6,800. 
C)$10,400. 
D)$1,800.

Quizplus · Accepted Answer

To calculate the uncollectible accounts expense, we need to subtract the estimated uncollectible portion ($8,600) from the accounts receivable balance ($239,000). This gives us a net realizable value of $230,400. Next, we need to determine the change in the allowance for doubtful accounts. The unadjusted balance of the allowance account is $2,400 ($2,900 credit balance minus $500 debit balance). Using the aging method, we determined that the estimated uncollectible portion is $8,600. Therefore, we need to increase the allowance account by $6,800 ($8,600 - $1,800). This will bring the ending balance of the allowance account to $9,200 ($2,400 + $6,800 credit). The uncollectible accounts expense for March is the difference between the beginning and ending balances of the allowance account, which is $1,800 ($2,400 beginning balance minus $9,200 ending balance). Therefore, the answer is B.

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