Before the year-end adjustment, the credit balance in Allowance for Uncollectible Accounts was $1,000. Under the aging-of-receivables method, the Uncollectible-Account Expense at year-end is:

Question

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The aging-of-receivables method requires the company to estimate the amount of uncollectible receivables based on the age of the receivables. The company applies different percentages to the total amount of receivables based on how long they have been outstanding. The sum of all estimated uncollectible amounts is then recorded as the Uncollectible-Account Expense.

Since we know that the credit balance in Allowance for Uncollectible Accounts was $1,000 before the adjustment, we need to add that to the total estimated uncollectible amount to arrive at the Uncollectible-Account Expense.

Let's say that the estimated uncollectible amounts from each aging category are as follows: 
- Current: $5,000 x 1% = $50 
- 1-30 days past due: $2,000 x 3% = $60 
- 31-60 days past due: $1,000 x 6% = $60 
- 61-90 days past due: $500 x 10% = $50 
- Over 90 days past due: $500 x 25% = $125

The total estimated uncollectible amount would be $345. When we add the credit balance in Allowance for Uncollectible Accounts ($1,000), the final Uncollectible-Account Expense is $1,345. However, we only need to find the amount of the expense increase due to the year-end adjustment, so we subtract the beginning balance in the allowance account from the final expense:

$1,345 - $1,000 = $345

Therefore, the answer is B, $8,870.

Before the Year-End Adjustment, the Credit Balance in Allowance for Uncollectible