Gross Accounts Receivable is $39,000. Allowance for Doubtful Accounts has a credit balance of $300. Net credit sales for the year are $190,000. In the past, 2% of credit sales had proved uncollectible. What would be the adjusted balance of the Allowance account under the income statement approach?
A) $4,880
B) $4,100
C) $3,800
D) $3,500

Question

Quizplus · Accepted Answer

The income statement approach estimates uncollectible accounts based on a percentage of net credit sales. Here, 2% of $190,000 is $3,800. Since the Allowance for Doubtful Accounts already has a credit balance of $300, the adjusted balance would be $3,800 + $300 = $4,100.

Gross Accounts Receivable Is $39,000