Using the aging-of-receivables method to estimate uncollectibles, Greeley Corporation estimates that $9,500 of its accounts receivable will be uncollectible. Prior to adjustment, the Allowance for Uncollectible Accounts has a credit balance of $3,000. After all necessary adjusting entries are made, the balance in Allowance for Uncollectible Accounts will be:

Question

Quizplus · Accepted Answer

The aging-of-receivables method estimated $9,500 of uncollectibles, which means that the balance in the Allowance for Uncollectible Accounts needs to be increased by $9,500.

Since the Allowance for Uncollectible Accounts currently has a credit balance of $3,000, it means that the company has already set aside $3,000 to cover potential uncollectibles. Therefore, the adjustment entry needs to increase the allowance by an additional $6,500 ($9,500 - $3,000).

This means that the new balance in Allowance for Uncollectible Accounts will be $9,500 (credit balance of $3,000 + addition of $6,500).

Therefore, the correct answer is B) $6,500.

Using the Aging-Of-Receivables Method to Estimate Uncollectibles, Greeley Corporation Estimates