Gross Accounts Receivable is $12,000.Allowance for Doubtful Accounts has a credit balance of $600.Net sales for the year are $100,000.In the past,2% of sales had proved uncollectible,and an aging of the receivables indicates $1,900 as uncollectible.What would be the adjusted balance of the Allowance account under the balance sheet approach?
A)$2,000
B)$1,400
C)$2,500
D)$1,900

Question

Quizplus · Accepted Answer

Under the balance sheet approach, the Allowance for Doubtful Accounts is adjusted to reflect the estimated uncollectible receivables based on an aging of the accounts receivable. The aging indicates $1,900 as uncollectible, so the Allowance account should be adjusted to this amount, regardless of the current balance or the percentage of sales historically found uncollectible.

Gross Accounts Receivable Is $12,000