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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.

(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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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.

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7. Turner Co. estimates its uncollectible accounts expense to be 2 percent of credit sales. Turner's credit sales for 2006 were $1,000,000. During 2006, Turner wrote off $18,000 of uncollectible accounts. Turner's Allowance for Uncollectible Accounts account had a $15,000 balance on January 1, 2006. On its December 31, 2006 income statement, what amount should Turner report as bad debt expense?

8. Post Company estimates bad debts at 3% of gross accounts receivable. The following information is from the balances of Post before adjustments:
Debit Credit
Accounts Receivable $2,600,000
Allowance for Uncollectible Accounts 20,800
Net Credit Sales $7,800,000

After adjustment at December 31, 2006, the Allowance for Uncollectible Accounts account should have a credit balance of?

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