Bay Company began using the allowance method in 2014. On January 1, 2014, Bay had a $3,000 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2014, Bay provided $25,000 of service on account. The company collected $21,000 cash from account receivable. Uncollectible accounts are estimated to be 2% of sales on account.
The balance in Accounts Receivable as of December 31, 2014 was
A) $7,000.
B) $4,000.
C) $8,000.
D) $500.

Question

Quizplus · Accepted Answer

The correct answer is A.The balance in Accounts Receivable as of December 31, 2014 is $7,000.Beginning balance in Accounts Receivable = $3,000Add: Service revenue on account = $25,000Less: Cash collected from accounts receivable = $21,000Less: Estimated uncollectible accounts (2% of sales on account) = $500Ending balance in Accounts Receivable = $7,000

Bay Company Began Using the Allowance Method in 2014