Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $64,000 and $3,150, respectively. During Year 2, Allegheny wrote off $5,700 of Uncollectible Accounts. Using the percent of receivables method, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $5,000. What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

Question

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The allowance needs to be adjusted to $5,000. Starting with $3,150, after writing off $5,700, the allowance is negative $2,550. To reach $5,000, an expense of $7,550 is needed.

Allegheny Company Ended Year 1 with Balances in Accounts Receivable