A company has a balance in Accounts Receivable of $600,000 at the end of the year and it estimates that uncollectible accounts will be 2% of accounts receivable. If Allowance for Doubtful Accounts has a credit balance of $1,000 prior to adjustment, its balance after adjustment will be a credit of:

Question

Quizplus · Accepted Answer

The correct answer is A because the Allowance for Doubtful Accounts should be increased by $12,000 ($600,000 x 2%) to bring its balance to a credit of $13,000 ($1,000 + $12,000).

A Company Has a Balance in Accounts Receivable of $600,000