At January 1, Everbright Sales has the following balances: During the year, Everbright has $150,000 of credit sales, collections of $140,000, and write-offs of $3,000. Everbright records Uncollectible account expense at the end of the year using the aging method. At the end of the year, the aging analysis produces a figure of $1,900, being the estimate of uncollectible accounts at end of year.
After the year-end entry to adjust the Uncollectible accounts expense is made, what is the final balance in the Allowance for uncollectible accounts?

Question

At January 1, Everbright Sales has the following balances:  During the year, Everbright has $150,000 of credit sales, collections of $140,000, and write-offs of $3,000. Everbright records Uncollectible account expense at the end of the year using the aging method. At the end of the year, the aging analysis produces a figure of $1,900, being the estimate of uncollectible accounts at end of year.
After the year-end entry to adjust the Uncollectible accounts expense is made, what is the final balance in the Allowance for uncollectible accounts?

Quizplus · Accepted Answer

To calculate the final balance in the Allowance for uncollectible accounts, we need to first determine the total amount of Uncollectible account expense for the year.

Using the aging method, we have an estimate of $1,900 for uncollectible accounts at the end of the year. We also know that there were write-offs of $3,000 during the year. Therefore, the total Uncollectible account expense for the year is:

$1,900 + $3,000 = $4,900

Now, we need to adjust the Allowance for uncollectible accounts to reflect this expense. The original balance was $3,500 ($11,000 x 0.32). The adjusting entry would be:

Dr. Uncollectible accounts expense $4,900
Cr. Allowance for uncollectible accounts $4,900

After this entry, the final balance in the Allowance for uncollectible accounts would be:

$3,500 (original balance) - $4,900 (adjusting entry) = ($1,400)

The final balance is a credit balance of $1,400, which means the answer is (C) Credit of $1,900. However, this answer is not provided in the options. The closest option is (C) Credit of $1,900, which is incorrect.

At January 1, Everbright Sales Has the Following Balances