On December 31, 2016 before adjusting entries, Accounts Receivable for Nickolas Company had a debit balance of $200,000, and the Allowance for Doubtful Accounts had a credit balance of $6,000. Credit sales for the year were $1,600,000.

If credit losses are estimated at 1% of credit sales:

a. The balance of the Allowance for Doubtful Accounts will be $10,000 after adjustment.
b. The balance of the Allowance for Doubtful Accounts will be $22,000 after adjustment.
c. The balance of the Allowance for Doubtful Accounts will be $16,000 after adjustment.
d. Bad Debts Expense for the year will be $22,000.

If credit losses are estimated at 1% of credit sales than balance of allowance for doubtful account after adjustment will be = $6,000 + $1,600,000 * 1%

= $6,000 + $16,000

= $22,000

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andromache andromache · Answer 2 · 2022-02-24T12:18:51+01:00

In the case when the credit losses are estimated at 1% of credit sales so here option b is considered.

Calculation of the balance of allowance for a doubtful account after adjustment:

= Credit balance of Allowance for Doubtful Accounts + Estimated percentage of Credit sales for the year

= $6,000 + 1% of $1,600,000

= $6,000 + $16,000

= $22,000

Therefore, option b is correct.

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