Question

At the end of the first year of operations, Mayberry Advertising had accounts receivable of $21,200. Management of the company estimates that 9% of the accounts will not be collected. What adjustment would Mayberry Advertising record for Allowance for Uncollectible Accounts

Answer 1

Answer: Credit Allowance for Uncollectible Accounts $1,908

Explanation:

The Allowance for Uncollectible Accounts is an account where an estimate of receivables that may not be received is recorded. It is the result of companies being proactive in collection management so as not to overstate assets because there will always be a risk of customers defaulting.

The allowance/estimate is made by the company and then reduced from the Receivables account. That amount removed is credited to the Allowance for Uncollectible Accounts.

= 21,200 * 9%

= $1,908