On December 31, prior to adjustments, the balance of Accounts Receivable is $28,000 and Allowance for Doubtful Accounts has a debit balance of $200. The firm estimates its losses from uncollectible accounts to be 5.5% of accounts receivable at the end of the year. The balance is Allowance for Doubtful Accounts after adjustment is

Question

Quizplus · Accepted Answer

First, we need to calculate the estimated amount of uncollectible accounts, which is 5.5% of $28,000:
$28,000 x 5.5% = $1,540

Since Allowance for Doubtful Accounts currently has a debit balance of $200, we need to increase it by $1,540 to bring the balance to the estimated amount of uncollectible accounts:
$200 + $1,540 = $1,740

Therefore, the balance in Allowance for Doubtful Accounts after adjustment is $1,740, so the correct answer is option D.

On December 31, Prior to Adjustments, the Balance of Accounts