A company's allowance for doubtful accounts is $4,000 and $3,000 on 1/1/11 and 1/1/10, respectively. During 2010, bad debts expenses were estimated to be 6% on net credit sales of $100,000. During 2010, the amount of accounts written off as uncollectible amounts to
A) $6,000.
B) $7,000.
C) $5,000.
D) $4,000.

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts increased by $1,000 from 1/1/10 to 1/1/11. Bad debts expense for 2010 is $6,000 (6% of $100,000). Therefore, the accounts written off must be $5,000 to reconcile the increase in the allowance account: $3,000 (beginning balance) + $6,000 (bad debts expense) - $5,000 (write-offs) = $4,000 (ending balance).

A Company's Allowance for Doubtful Accounts Is $4,000 and $3,000