Answer:
Concord Corporation has outstanding accounts receivable totaling $1.29 million as of December 31 and sales on credit during the year of $6.30 million. There is also a debit balance of $6100 in the allowance for doubtful accounts. If the company estimates that 2% of its accounts receivable will be uncollectible, the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense will be $25800 - option B.
Explanation:
Estimated uncollectible = 2% of account receivables
Allowance account’s adjusted balance must be the same as estimated uncollectible balance.
Therefore, the adjusted Allowance for Doubtful Account = $1.29 millions x 2%
= $1.29*0.02
The adjusted Allowance for Doubtful Account = $ 0.0258 millions or $ 25,800.
Therefore, the correct answer is $ 25,800 - option B.
Answer:
Balance of uncollectible accounts - $ 25,800
Explanation:
Computation of Bad debts expense
The allowance of uncollectible accounts are calculated as a percentage of outstanding receivables.
Accounts receivable balance $ 1,290,000
Percentage estimated to be uncollectible 2 %
Estimated balance of uncollectible accounts $ 25,800
The balance in the uncollectible account shall be 2 % of receivable i.e $ 25,800.
The adjustment entry shall be debited at $ 31,900, being the balance amount plus the debit balance in the allowance account prior to adjustment.
