In 2021, Warehouse 13 had net credit sales of $750,000.On January 1, 2021, Allowance for Doubtful Accounts had a credit balance of $16,000.During 2021, $29,000 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 $150,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2021?

Question

Quizplus · Accepted Answer

The required adjustment to the Allowance for Doubtful Accounts at December 31, 2021 is computed as follows:

10% * $150,000 = $15,000 (required ending balance for allowance)
$15,000 - $16,000 = ($1,000) (current credit balance)
$1,000 + $29,000 = $28,000 (required adjustment to allowance)

Therefore, the correct answer is C) $28,000.

In 2021, Warehouse 13 Had Net Credit Sales of $750,000