In February, one of Team Shirts’ best customers went bankrupt owing Team Shirts $85. Team Shirts uses the sales method for estimating bad debts. February sales were $15,000. The accountant has been using 3% of sales as the estimated bad debts percentage. Before adjustment and the write-off, the balance in the allowance for uncollectible accounts was $(100). After the write-off and adjustment, the balance in the allowance for uncollectible accounts should be ________.

Question

Quizplus · Accepted Answer

The estimated bad debts percentage is 3% of $15,000 = $450. 
With the bankruptcy write-off of $85, the balance in the allowance for uncollectible accounts should be $(100 + $85 + $450) = $435.
However, the question asks for the balance "after adjustment and the write-off." We don't know what the current balance is, so we can't simply subtract $85 and add $450. We need to calculate the necessary adjustment. 
The current balance in the allowance for uncollectible accounts is $(100), which is $335 short of the necessary balance of $435. Therefore, an adjustment of $335 needs to be added to the allowance for uncollectible accounts. 
Adding $335 to the current balance of $(100) gives us a new balance of $(100 + $335) = $235. 
However, the question asks for the balance in the allowance for uncollectible accounts after the write-off and adjustment, so we need to subtract the $85 write-off from the $235 balance. 
The final answer is $235 - $85 = $150. 
Therefore, the correct choice is C) $465.

In February, One of Team Shirts’ Best Customers Went Bankrupt