On January 1, 2013, Murphy Printing Company's allowance for doubtful accounts had a credit balance of $6,000.Sales revenue for 2013 was $1,000,000, of which 80% was on credit.Historical data indicates that 3% of gross credit sales prove uncollectible.What should the balance in the allowance account be after the adjusting entry for doubtful accounts is made?

Question

Quizplus · Accepted Answer

Step 1: Calculate the total credit sales for 2013:
Credit sales = $1,000,000 x 80% = $800,000

Step 2: Calculate the estimated amount of uncollectible accounts:
Uncollectible accounts = 3% x $800,000 = $24,000

Step 3: Determine the required ending balance for the allowance account:
Required ending balance = Beginning balance + Bad debt expense - Write-offs
In this case, there were no write-offs, so the required ending balance is:
$6,000 + $24,000 - $0 = $30,000

Therefore, the balance in the allowance account after the adjusting entry for doubtful accounts is made should be $30,000 credit. The correct answer is choice C.

On January 1, 2013, Murphy Printing Company's Allowance for Doubtful