Smith Technical Services is working on a six-month job for a client,starting on 1 February.They will collect $20,000 from their customer when the job is finished.On 1 March,their Accounts receivable account had a debit balance of $4000.At the end of March,after monthly adjusting entries have been made,what will be the balance in Accounts receivable?
A)Debit balance of $3333
B)Debit balance of $7333
C)Credit balance of $16,667
D)Debit balance of $20,000

Question

Quizplus · Accepted Answer

Since the job began on 1 February and we're calculating the balance at the end of March, we've completed two months of work. Assuming the client pays at the end of the job, we should have collected $20,000/6 = $3,333.33 by now (i.e. at the end of March). But our Accounts Receivable account has a $4,000 debit balance, which means we haven't collected enough. The difference between what we've collected and what we should have collected is $4,000 - $3,333.33 = $666.67. Therefore, the adjusted balance in the Accounts Receivable account at the end of March will be $4,000 + $666.67 = $4,666.67 (debit).

Smith Technical Services Is Working on a Six-Month Job for a Client,starting