Allowance for Doubtful Accounts has a debit balance of $700 at the end of the year, before adjustments. Sales for the year amounted to $920,000, sales discounts amounted to $31,200 and sales returns and allowances amounted to $42,300.
- If the uncollectible accounts expense is estimated at 2% of net sales, the amount of the adjusting entry to record the estimated losses from uncollectible accounts will be
A)$16,930
B)$16,230
C)$18,400
D)$17,630

Question

Quizplus · Accepted Answer

The uncollectible accounts expense is estimated at 2% of net sales. Net sales are sales minus sales discounts and sales returns and allowances. Therefore, net sales are $920,000 - $31,200 - $42,300 = $846,500. The uncollectible accounts expense is estimated to be 2% of $846,500, which is $16,930. The adjusting entry to record the estimated losses from uncollectible accounts will be a debit to Uncollectible Accounts Expense for $16,930 and a credit to Allowance for Doubtful Accounts for $16,930.

Allowance for Doubtful Accounts Has a Debit Balance of $700