At the close of its first year of operations, December 31, 2010, Ming Company had accounts receivable of $540,000, after deducting the related allowance for doubtful accounts.During 2010, the company had charges to bad debt expense of $90,000 and wrote off, as uncollectible, accounts receivable of $40,000.What should the company report on its statement of financial position at December 31, 2010, as accounts receivable before the allowance for doubtful accounts?

Question

Quizplus · Accepted Answer

The accounts receivable before the allowance for doubtful accounts can be calculated by adding the allowance for doubtful accounts to the accounts receivable.

Allowance for doubtful accounts = charges to bad debt expense - writeoffs
Allowance for doubtful accounts = $90,000 - $40,000
Allowance for doubtful accounts = $50,000

Accounts receivable before the allowance for doubtful accounts = accounts receivable + allowance for doubtful accounts
Accounts receivable before the allowance for doubtful accounts = $540,000 + $50,000
Accounts receivable before the allowance for doubtful accounts = $590,000

Therefore, the company should report $590,000 on its statement of financial position at December 31, 2010, as accounts receivable before the allowance for doubtful accounts. Option B is the correct answer.

At the Close of Its First Year of Operations, December