Piper, Inc. had credit sales for the period of $85,000. The balance in Allowance for Doubtful Accounts is a debit of $827. How much will the credit be to Allowance for Doubtful Accounts if Piper uses the percent of credit sales method of estimating uncollectible accounts and they estimate that 2% of credit sales will be uncollectible?

Question

Quizplus · Accepted Answer

Using the percent of credit sales method, the estimated amount of uncollectible accounts would be $1,700 ($85,000 x 2%). Since the balance in Allowance for Doubtful Accounts is currently a debit of $827, a credit of $1,700 would be needed to bring the balance to the correct amount. Therefore, the credit to the Allowance for Doubtful Accounts would be $1,700. Option D is the correct answer.