In 2018, Chandler Company had net credit sales of $1,125,000. On January 1, 2018, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2018, $42,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $380,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2018?

Question

Quizplus · Accepted Answer

First, we need to calculate the desired balance for the Allowance for Doubtful Accounts using the percentage of receivables basis:

Desired balance = 10% x $380,000 = $38,000

Next, we need to adjust the current balance to the desired balance:

Current balance = $27,000 (given)

Adjustment needed = $38,000 - $27,000 = $11,000

Finally, we need to add back the amount of accounts written off during the year:

Adjustment needed = $11,000 + $42,000 = $53,000

Therefore, the correct answer is C.

In 2018, Chandler Company Had Net Credit Sales of $1,125,000