Siamese Corp.'s account balances at December 31, 2020, included Accounts Receivable, $ 360,000 debit; Allowance for Doubtful Accounts, $ 400 debit. Sales during 2020 were $ 920,000. It is estimated that 2% of sales will be uncollectible. The required adjusting entry would include a credit to the allowance account for
A) $ 14,400.
B) $ 18,400.
C) $ 7,200.
D) $ 15,300.

Question

Quizplus · Accepted Answer

To estimate the amount of uncollectible accounts, we multiply the sales by the estimated percentage: $920,000 x 2% = $18,400. To adjust the allowance account, we need to increase it by the same amount, so we would credit the allowance account for $18,400.