A firm reported net credit sales of $225,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end.Prior to adjustments,Allowance for Doubtful Accounts has a debit balance of $100.The firm estimates its losses from uncollectible accounts to be one-half of 1 percent of net credit sales.The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
A) $1,225.
B) $1,125.
C) $900.
D) $2,250.

Question

Quizplus · Accepted Answer

The estimated losses from uncollectible accounts can be calculated as follows:
$225,000 x 0.5% = $1,125

To record this estimate, the Allowance for Doubtful Accounts account should be credited for $1,125, which will increase the balance to $1,025 ($100 + $1,125 - $200). Therefore, the correct answer is (B) $1,125.

A Firm Reported Net Credit Sales of $225,000 During the Year