A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following: At the end of the year,the credit balance in Allowance for Uncollectible Accounts was $700.Under the aging-of-receivables method,the balance in the Allowance for Uncollectible Accounts will be ________ after the adjusting entry is made.

Question

A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following:  At the end of the year,the credit balance in Allowance for Uncollectible Accounts was $700.Under the aging-of-receivables method,the balance in the Allowance for Uncollectible Accounts will be ________ after the adjusting entry is made.

Quizplus · Accepted Answer

To calculate the balance in the allowance for uncollectible accounts, we need to use the aging-of-receivables method. The estimated uncollectible percentage for each category of accounts is as follows:

- Current: 2% 
- 1-30 days past due: 5% 
- 31-60 days past due: 10% 
- Over 60 days past due: 50%

We need to calculate the total estimated uncollectible amount by applying these percentages to the corresponding categories of accounts.

- Current: $100,000 x 2% = $2,000 
- 1-30 days past due: $40,000 x 5% = $2,000 
- 31-60 days past due: $20,000 x 10% = $2,000 
- Over 60 days past due: $10,000 x 50% = $5,000

The total estimated uncollectible amount is $11,000. We then subtract the existing credit balance in the allowance for uncollectible accounts ($700) to get the amount of the adjusting entry:

$11,000 - $700 = $10,300

Therefore, the balance in the allowance for uncollectible accounts will be $7,300 ($10,300 - $3,000). Hence, the correct answer is option C.

A Year-End Review of Accounts Receivable and Estimated Uncollectible Percentages