Marston Company has outstanding accounts receivable totaling €4.5 million as of December 31 and sales on credit during the year of €20 million. There is also a credit balance of €18,000 in the allowance for doubtful accounts. After aging its receivables, the company estimates that 2% of its receivables will be uncollectible. What will be the balance for the Allowance for Uncollectible Accounts after the year-end adjustment is made to record bad debt expense?

Question

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The estimated uncollectible amount is 2% of €4.5 million, which is €90,000. The existing credit balance of €18,000 in the allowance account means the adjustment needed is €72,000 (€90,000 - €18,000), resulting in a final balance of €90,000.

Marston Company Has Outstanding Accounts Receivable Totaling €4