# Calculation of the Allowance for Doubtful Accounts

15. ABC company uses the estimate of sales method of accounting for uncollectible accounts. ABC estimates that 3% of all credit sales will be uncollectible. On January 1, 2005, the Allowance for Doubtful Accounts had a credit balance of \$2,400. During 2005, ABC wrote-off accounts receivable totaling \$1,800 and made credit sales of \$100,000. After the adjusting entry, the December 31, 2005, balance in the Uncollectible Accounts Expense would be ________. (Points: 4)
\$1,200
\$3,000
\$3,600
\$7,200

16. Allowance for Doubtful Accounts has a credit balance of \$1,500 at the end of the year (before adjustment), and an analysis of customers' accounts indicates doubtful accounts of \$17,900. Which of the following entries records the proper provision for doubtful accounts? (Points: 4)
debit Allowance for Doubtful Accounts, \$16,400; credit Uncollectible Accounts Expense, \$16,400
debit Allowance for Doubtful Accounts, \$19,400; credit Uncollectible Accounts Expense, \$19,400
debit Uncollectible Accounts Expense, \$19,400; credit Allowance for Doubtful Accounts, \$19,400
debit Uncollectible Accounts Expense, \$16,400; credit Allowance for Doubtful Accounts, \$16,400

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• Brainamss.doc

Solution Summary

The solution provides the calculations for the two problems but also explains the difference in the two methods of computing an allowance amount. Both methods are acceptable, but quite different in their approach.

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Pat Mitchell, CPA (retired)

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Extracted Content from Question Files:

• Brainamss.doc

15.Â ABC company uses the estimate of sales method of accounting for
uncollectible accounts.Â  ABC estimates that 3% of all credit sales will
be uncollectible.Â  On January 1, 2005, the Allowance for Doubtful
Accounts had a credit balance of \$2,400.Â  During 2005, ABC wrote-off
accounts receivable totaling \$1,800 and made credit sales of \$100,000.Â
After the adjusting entry, the December 31, 2005, balance in the
Uncollectible Accounts Expense would be ________. (Points: 4)

\$1,200

\$3,000

\$3,600

\$7,200

16.Â Allowance for Doubtful Accounts has a credit balance of \$1,500 at
the end of the year (before adjustment), and an analysis of customers'
accounts indicates doubtful accounts of \$17,900.Â  Which of the
following entries records the proper provision for doubtful accounts?
(Points: 4)

debit Allowance for Doubtful Accounts, \$16,400; credit Uncollectible
Accounts Expense, \$16,400

debit Allowance for Doubtful Accounts, \$19,400; credit Uncollectible
Accounts Expense, \$19,400

debit Uncollectible Accounts Expense, \$19,400; credit Allowance for
Doubtful Accounts, \$19,400

debit Uncollectible Accounts Expense, \$16,400; credit Allowance for
Doubtful Accounts, \$16,400