The data presented below is for Mellon Corporation for the year ended December 31, 2016: $\begin{array}{lr}
\text { Sales (100\% on credit) } & \$ 1,500,000 \
\text { Sales returns } & 60,000 \
\text { Accounts Receivable (December 31, 2016) } & 250,000 \
\text { Allowance for Doubtful Accounts [Credit B al ance] (Before adjustment at December } & \
31,2016 &3,000 \
\text { Estimated amount of uncollectible accounts based on an aging analysis }&31,000\
\end{array}$
-Refer to information for Mellon Corporation. If Mellon uses 2% of net credit sales to estimate its bad debts, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?
A) $33,000
B) $31,800
C) $27,000
D) $25,800

Question

The data presented below is for Mellon Corporation for the year ended December 31, 2016: $\begin{array}{lr}
\text { Sales (100\% on credit) } & \$ 1,500,000 \
\text { Sales returns } & 60,000 \
\text { Accounts Receivable (December 31, 2016) } & 250,000 \
\text { Allowance for Doubtful Accounts [Credit B al ance] (Before adjustment at December } & \
31,2016 &3,000  \
\text { Estimated amount of uncollectible accounts based on an aging analysis }&31,000\
\end{array}$
-Refer to information for Mellon Corporation. If Mellon uses 2% of net credit sales to estimate its bad debts, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts?
A) $33,000
B) $31,800
C) $27,000
D) $25,800

Quizplus · Accepted Answer

Net credit sales are calculated as Sales - Sales returns = $1,500,000 - $60,000 = $1,440,000. Using 2% of net credit sales to estimate bad debts gives $1,440,000 * 2% = $28,800. The existing credit balance in the Allowance for Doubtful Accounts is $3,000. Therefore, the adjusted balance is $28,800 + $3,000 = $31,800.

The Data Presented Below Is for Mellon Corporation for the Year