Use the following information for questions below
Melrose Company recorded $3,500,000 in credit sales in 2020 and prepared the following aging schedule of their $730,000 in Accounts Receivable as at December 31,2020:
$$\begin{array} { c c c }
\text { Days outstanding } & \text { Balance } & \text { Estimated percentage uncollectible } \
\hline 0 - 30 \text { days } & \$ 350,000 & 1 \% \
31 - 60 \text { days } & 275,000 & 2 \% \
61 - 90 \text { days } & 67,500 & 5 \% \
\text { 0ver 90 days } & 37,500 & 25 \%
\end{array}$$
The balance in their Allowance for Doubtful Accounts before year-end adjustments is a $2,000 credit.
-The balance in the Allowance for Doubtful Accounts after year-end adjustments will be
A)$2,000.
B)$23,750.
C)$21,750.
D)$19,750.

Question

Use the following information for questions below
Melrose Company recorded $3,500,000 in credit sales in 2020 and prepared the following aging schedule of their $730,000 in Accounts Receivable as at December 31,2020:
$$\begin{array} { c c c } 
\text { Days outstanding } & \text { Balance } & \text { Estimated percentage uncollectible } \
\hline 0 - 30 \text { days } & \$ 350,000 & 1 \% \
31 - 60 \text { days } & 275,000 & 2 \% \
61 - 90 \text { days } & 67,500 & 5 \% \
\text { 0ver 90 days } & 37,500 & 25 \%
\end{array}$$
The balance in their Allowance for Doubtful Accounts before year-end adjustments is a $2,000 credit.
-The balance in the Allowance for Doubtful Accounts after year-end adjustments will be
A)$2,000.
B)$23,750.
C)$21,750.
D)$19,750.

Quizplus · Accepted Answer

The balance in the Allowance for Doubtful Accounts after year-end adjustments will be $21,750, calculated as follows: 
- For accounts aged 0-30 days, the allowance rate is 1%, so the allowance amount is $2,100 (0.01 x $210,000). 
- For accounts aged 31-60 days, the allowance rate is 3%, so the allowance amount is $6,480 (0.03 x $216,000). 
- For accounts aged over 60 days, the allowance rate is 10%, so the allowance amount is $13,170 (0.10 x $131,000). 
- Summing these three amounts together gives a total allowance of $21,750. Since the balance in the Allowance for Doubtful Accounts before year-end adjustments is a $2,000 credit and the total allowance required after adjustments is $21,750, the necessary adjustment to the Allowance for Doubtful Accounts is an increase of $23,750 ($21,750 - $2,000).

Use the Following Information for Questions Below Melrose Company Recorded

Use the Following Information for Questions Below
Melrose Company Recorded