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Calculate Uncollectible Accounts Expense and Allowance

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The general ledger account for Accounts Receivable shows a debit balance of $40,000. The Allowance for Uncollectible Accounts has a credit balance of $2,000. Net sales for the year were $250,000. In the past, 3 percent of net sales have proved uncollectible. An aging of accounts receivable results in an estimate of $9,000 of uncollectible accounts receivable.

Calculate:
(1) Uncollectible Accounts Expense
(2) the ending balance of the Allowance for Uncollectible Accounts using (a) the Percentage of Net Sales method and (b) the Accounts Receivable Aging method.

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Solution Preview

Using the Percentage of Net Sales method

(1) Uncollectible Accounts Expense: $250,000*3%= $7,500
(2) The ending balance of the Allowance for Uncollectible Accounts : Opening balance = $2,000 (cr) + $7,500 = $9,500 ...

Solution Summary

This solution explains how to compute the amount that should be debited to the Uncollectible Accounts Expense. Two methods are used: the Percentage of Net Sales Method and Accounts Receivable Aging Method.

$2.19