The current debit balance in allowance for doubtful accounts is $465. Management estimates that 3% of net credit sales of $205,000 will be uncollectible. Based on the foregoing data, what is the allowance for doubtful accounts balance on the balance sheet?
A)$6,150
B)$6,615
C)$5,685
D)$465

Question

Quizplus · Accepted Answer

The allowance for doubtful accounts balance is calculated by adding the current debit balance to the estimated uncollectible amount. The estimated uncollectible amount is 3% of $205,000, which is $6,150. Since the current balance is a debit of $465, we need to offset this first before adding the new estimate. Therefore, the new balance is $6,150 - $465 = $5,685.

The Current Debit Balance in Allowance for Doubtful Accounts Is