Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2013, Chez Fred's credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2013, if $180 in accounts receivable were written off during 2013 and if the allowance account had a balance of $750 on December 31, 2013?

Question

Quizplus · Accepted Answer

First, we need to calculate the credit sales for Chez Fred Bakery in 2013 by subtracting the collections from the credit sales:

$125,000 - $131,000 = ($6,000)

This means that $6,000 worth of credit sales were not collected in 2013.

Next, we need to calculate the total amount of accounts receivable that Chez Fred Bakery had during 2013:

Beginning balance + Credit sales - Collections - Write-offs = Ending balance

B + $125,000 - $131,000 - $180 = E

B - $6,180 = E

We know that the allowance for uncollectible accounts is 3% of the ending balance, so we can set up another equation:

Ending balance * 3% = Allowance for uncollectible accounts

E * 0.03 = $750

E = $25,000

Now we can solve for the beginning balance:

B - $6,180 = $25,000

B = $31,180

Therefore, the balance of accounts receivable on January 1, 2013, was $31,180.

Chez Fred Bakery Estimates the Allowance for Uncollectible Accounts at 3