At January 1, Davidson Services has the following balances: During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400.
Davidson records Uncollectible Account Expense at the end of the year using the percent-of-sales method, and applies a rate of 1.1%, based on past history.
After the year-end entry to adjust the Uncollectible accounts expense, what is the ending balance in the Uncollectible accounts expense?

Question

At January 1, Davidson Services has the following balances:  During the year, Davidson has $104,000 of credit sales, collections of $100,000, and write-offs of $1,400.
Davidson records Uncollectible Account Expense at the end of the year using the percent-of-sales method, and applies a rate of 1.1%, based on past history.
After the year-end entry to adjust the Uncollectible accounts expense, what is the ending balance in the Uncollectible accounts expense?

Quizplus · Accepted Answer

The total credit sales for Davidson Services during the year were $104,000. Applying a rate of 1.1% will give us the estimated uncollectible accounts expense of $1,144 ($104,000 x 1.1%). Since $1,400 was also written off during the year, the adjusting entry would be a debit to Uncollectible Accounts Expense for $256 ($1,400 - $1,144). Hence, the ending balance in Uncollectible Accounts Expense would be a debit of $1,144 + $256 = $1,400. Therefore, choice (C) is the correct answer.

At January 1, Davidson Services Has the Following Balances