Question

Arundel Company uses percentage of sales to estimate uncollectibles. At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance of $78,000 and had a total of $875,000 in credit sales. Arundel assumes that 1.0% of sales will eventually be uncollectible. Before adjustment, the Allowance for Uncollectible Accounts had a credit balance of 4,000. What is the ending balance in the Allowance for Uncollectible Accounts at year end?

Answer 1

ending balance: 8,750

Step-by-step explanation:

AR 78,000

uncollectible amounts 1% of sales

expected uncollectible amounts 875,000 x 1% = 8,750 --> ending balance

allowance for uncollectible beginning balance (4,000)

Adjustment 3,750 credit

We need to adjust for 3,750 to get expected uncollectibles.