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The following accounts were abstracted from XYZ Co.’s unadjusted trial balance at December 31:

Debit               Credit

                     Accounts receivable                               $1,000,000

Allowance for uncollectible accounts                                    8,000

Net credit sales                                                            $3,000,000

XYZ  estimates that3% of the gross accounts receivable will become uncollectible. After adjustment at December31, the allowance for uncollectible accounts should have a credit balance of

A. $90,000

B. $82,000

C. $38,000

D. $30,000

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Question ajoutée par Utilisateur supprimé
Date de publication: 2015/02/13
VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
par VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

Answer option C  >>>>>>>>>>>>>>>>>>  $38,000

Mir Mujtaba Ali
par Mir Mujtaba Ali , Internal Audit Manager , Confidential

uncollectible accounts should have estimate  -3%×1,000,000 = $30,000.

Lesley Lanag CMA CPA
par Lesley Lanag CMA CPA , Senior Accountant , Takaful Emarat Insurance (P.S.C)

D.  30,000

 

When estimating allowance for doubtful accounts using % of accounts receivable,  answer would become the ending balance of the allowance for doubtful account. Unlike when using % of credit sales where the answer is the bad debts charged during the period, which will be adjusted to the beginning balance and the accounts written off  to get the ending balance of allowance for bad debts. 

Ahmed kandil
par Ahmed kandil , Cost Controller , Battour Holding Cpompany

correct answer is( D)  30000

Mian Sameed Asrar
par Mian Sameed Asrar , Assistant Accounts , AAS Enterprises

if the allownce represnt the debit balance which is not clear in the question then answer is82000

Rania Nabil Abdul Hamid
par Rania Nabil Abdul Hamid , SYSTEM ANALIST ALOTHAMAN & ALSARAF COMPUTER CO

The answer should be A which  is $90,000

Utilisateur supprimé
par Utilisateur supprimé

Allowance for uncollectible accounts  AED38000

Ahmed Abdi Mahad
par Ahmed Abdi Mahad , Director of Internal Auditing Directorate , Jigjiga University

Given

A/R1000,000

Allowance for doubtful account before adjustment8,000

Est. allowance for doubtful account percentage3% of gross A/R

Then the estimated allowance for doubtful account is1000,000 *3% =30,000

Amount to be adjusted = (30,000 -8,000 =22,000

 

Adjusting entry

Doubtful account expense   22,000

  Allowance for doubtful account     22,000

So, choice D is the answer for this question

Utilisateur supprimé
par Utilisateur supprimé

Percentage of accounts receivable method is called balance sheet approach when we use it .  The allowance for uncollectible account should equal the percentage of the equation .

the allowance = balance of accounts receivable *3% = $30000

so the entry is :  debit / bad debts expense22000  and credit / allowance for uncollectible account $22000 .

according to GAAP 

Answer D is the right answer 

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