The following information is from the 2015 records of Armand Camera Shop: $$\begin{array} { | l | r | }
\hline \text { Accounts Receivable, December 31,2015 } & \$ 40,000 \text { (debit) } \
\hline \begin{array} { l }
\text { Allowance for Bad Debts, December 31,2015 } \
\text { prior to adjustment }
\end{array} & 1,500 \text { (debit) } \
\hline \text { Net credit sales for 2015 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2015 } & 15,000 \
\hline \text { Cash sales during 2015 } & 27,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the aging-of-receivables method. Management estimates that $5,000 of accounts receivable will be uncollectible. Calculate the Allowance for Bad Debts after the adjustment for bad debt expense at December 31, 2015.

Question

The following information is from the 2015 records of Armand Camera Shop: $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable, December 31,2015 } & \$ 40,000 \text { (debit) } \
\hline \begin{array} { l } 
\text { Allowance for Bad Debts, December 31,2015 } \
\text { prior to adjustment }
\end{array} & 1,500 \text { (debit) } \
\hline \text { Net credit sales for 2015 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2015 } & 15,000 \
\hline \text { Cash sales during 2015 } & 27,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the aging-of-receivables method. Management estimates that $5,000 of accounts receivable will be uncollectible. Calculate the Allowance for Bad Debts after the adjustment for bad debt expense at December 31, 2015.

Quizplus · Accepted Answer

The Allowance for Bad Debts should be adjusted to the estimated uncollectible amount of $5,000. Since the allowance account had a debit balance of $1,500 before adjustment, the adjustment needed is $5,000 - (-$1,500) = $6,500. However, the final balance in the allowance account should reflect the estimated uncollectible amount, which is $5,000.

The Following Information Is from the 2015 Records of Armand