In 2014 Wilkinson Company had net credit sales of $1,500,000. On January 1, 2014, Allowance for Doubtful Accounts had a credit balance of $36,000. During 2014, $60,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $400,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014?
A) $ 40,000
B) $150,000
C) $ 64,000
D) $ 60,000

Question

Quizplus · Accepted Answer

The required allowance is 10% of $400,000, which is $40,000. The existing balance after write-offs is $36,000 - $60,000 = -$24,000. To adjust to $40,000, an adjustment of $64,000 is needed.

In 2014 Wilkinson Company Had Net Credit Sales of $1,500,000