Net credit sales for the month are $750,000. The accounts receivable balance is $160,000. The allowance is calculated as 5% of the receivables balance using the percentage-of-receivables basis. If the Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment?
A) $ 8,000
B) $ 3,000
C) $13,000
D) $ 8,250

Question

Quizplus · Accepted Answer

The allowance is calculated as 5% of $160,000, which is $8,000. Since there is already a $5,000 credit balance, the adjustment needed is $3,000 to reach the $8,000 target balance. Thus, the balance after adjustment is $8,000.

Net Credit Sales for the Month Are $750,000