Black Corporation had a 1/1/14 balance in the Allowance for Doubtful Accounts of $18,000. During 2014, it wrote off $12,960 of accounts and collected $3,780 on accounts previously written off. The balance in Accounts Receivable was $360,000 at 1/1 and $432,000 at 12/31. At 12/31/14, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/14?

Question

Quizplus · Accepted Answer

The Allowance for Doubtful Accounts at 12/31/14 is calculated as follows: Start with the beginning balance of $18,000, subtract write-offs of $12,960, add recoveries of $3,780, and adjust to the estimated uncollectible amount of 5% of the ending Accounts Receivable balance ($432,000 * 5% = $21,600). The adjustments for write-offs and recoveries result in a balance of $8,820 before the year-end adjustment. To reach the required ending balance of $21,600, an additional adjustment is made, resulting in the final reported Allowance for Doubtful Accounts of $21,600.

Black Corporation Had a 1/1/14 Balance in the Allowance for Doubtful