On December 31,prior to adjustments,the balance of Accounts Receivable is $32,000 and Allowance for Doubtful Accounts has a credit balance of $190.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
A) $190.
B) $1,410.
C) $1,600.
D) $1,790.

Question

Quizplus · Accepted Answer

To calculate the estimated losses from uncollectible accounts, we need to multiply the Accounts Receivable balance by the estimated percentage of uncollectible accounts. 
$32,000 x 5% = $1,600

Since we already have a credit balance of $190 in the Allowance for Doubtful Accounts, we only need to adjust by the difference: 
$1,600 - $190 = $1,410

Therefore, the adjusting entry needed to record the estimated losses from uncollectible accounts is $1,410, which is option B.

On December 31,prior to Adjustments,the Balance of Accounts Receivable Is