Question

For 2021, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $89,500 and $2,700, respectively, at December 31, 2020. During 2021, Rahal's credit sales and collections were $410,000 and $414,000, respectively, and $3,240 in accounts receivable were written off. Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021, is: Multiple Choice $4,100. $4,700. $5,840. $3,560.

Answer 1

Answer: $3560

Explanation:

Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021, will be calculated thus:

Step 1: $410,000 × 1%

= $410,000 × 0.01

= $4100

Step 2: $2700 - $3240

= ($540)

Step 3: $4100 + ($540)

= $4100 - $540

= $3560

Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021, is $3560.