Question

Chen Company's account balances at December 31, 2017 for Accounts Receivable and the Allowance for Doubtful Accounts are $800,000 debit and $1,500 credit. Sales during 2017 were $2,750,000. It is estimated that 1% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for:___________.

A) $29,000.
B) $27,500.
C) $26,000.
D) $8,000.

Answer 1

B) $27,500.

Step-by-step explanation:

The computation of the amount credited to the allowance account is shown below:

= Sales during the 2017 year × estimated uncollectible percentage

= $2,750,000 × 1%

= $27,500

By multiplying the sales with the estimated uncollectible percentage we can get the amount credited to the allowance account and the same is to be considered

Hence, the correct option is B