On December 31,2016,prior to adjustments,Accounts Receivable has a debit balance of $370,000 and the Allowance for Doubtful Accounts has a credit balance of $400.The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year.The amount of the adjusting entry needed to record the estimated losses from uncollectible accounts is
A) $18,100
B) $18,500
C) $18,900
D) $17,800

Question

Quizplus · Accepted Answer

To find the estimated losses from uncollectible accounts, we need to multiply the ending balance of accounts receivable by the estimated percentage of uncollectible accounts.
$370,000 x 5% = $18,500

However, we also need to take into account the current balance in the Allowance for Doubtful Accounts. Since the balance is a credit, we need to subtract it from the estimated losses to find the necessary adjustment.
$18,500 - $400 = $18,100

Therefore, the adjusting entry needed is $18,100. Choice letter A is the best option.

On December 31,2016,prior to Adjustments,Accounts Receivable Has a Debit Balance