The Schnoll Company uses the allowance method of accounting for bad debts. In 2016, its first year of operations, the Schnoll Company had sales of $80 million on credit. Based on its historical experience, it expects that it will collect all but 1% of these amounts. Over the course of the year, it makes entries to record $800,000 of bad debt expense and to increase the allowance for doubtful accounts. During 2016, it became aware of $300,000 of amounts from specific customers that were not colle
A) Zero
B) 300000
C) 500000
D) 800000

Question

Quizplus · Accepted Answer

The company expects 1% of $80 million ($800,000) to be uncollectible. It has already identified $300,000 as uncollectible, so the remaining allowance for doubtful accounts should be $500,000 ($800,000 - $300,000).

The Schnoll Company Uses the Allowance Method of Accounting for Bad