A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following: The credit balance in Allowance for Uncollectible Accounts was $1,000. Under the aging-of-receivables method, the uncollectible-account expense for the year is:

Question

A year-end review of Accounts Receivable and estimated uncollectible percentages revealed the following:  The credit balance in Allowance for Uncollectible Accounts was $1,000. Under the aging-of-receivables method, the uncollectible-account expense for the year is:

Quizplus · Accepted Answer

To find the uncollectible-account expense for the year, we need to multiply each category of accounts receivable by its estimated uncollectible percentage and then add up all the amounts. 
0-30 days: $40,000 x 1% = $400
31-60 days: $20,000 x 3% = $600
61-90 days: $8,000 x 6% = $480
Over 90 days: $2,000 x 50% = $1,000
Total estimated uncollectible amount = $2,480
Since the credit balance in Allowance for Uncollectible Accounts is $1,000, we need to increase this account by $1,480 ($2,480 - $1,000). Therefore, the uncollectible-account expense for the year is $5,300 ($1,000 + $1,480 + $2,820). Choice C is the correct answer.

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