In 2010, the Dugan Co. had net credit sales of $750,000. On January 1, 2010, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2010, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivable basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2010?
A) $20,000
B) $34,000
C) $36,000
D) $30,000

Question

Quizplus · Accepted Answer

The required adjustment to the Allowance for Doubtful Accounts is $34,000. This is calculated as follows:Allowance for Doubtful Accounts = 10% x Accounts Receivable= 10% x $200,000= $20,000Required adjustment = Allowance for Doubtful Accounts - Beginning balance + Write-offs= $20,000 - $16,000 + $30,000= $34,000