Question

Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2013, Chez Fred's credit sales and collections were $120,000 and $143,000, respectively. What was the balance of accounts receivables on January 1, 2013, if $150 in accounts receivable were written off during 2013 and if the allowance account had a balance of $990 on December 31, 2013? a. $43,000. b. $840. c. $56,150. d. None of the above is correct.

Answer 1

Answer:

c. $56,150

Explanation:

We know that

Ending account receivable balance = Beginning account receivable + credit sales - collections - written off amount

$33,000 =  Beginning account receivable + $120,000 - $143,000 - $150

$33,000 =  Beginning account receivable - $23,150

So, the Beginning account receivable would be

= $33,000 + $23,150

= $56,150

The ending accounts receivable is computed below

= $990 ÷ 3%

= $33,000