The following information is from the 2016 records of Armand Camera Shop:
$$\begin{array} { | l | l | }
\hline \text { Accounts receivable, 31 December 2016 }&\$ 45,000 \text { (debit) } \
\hline \text { Allowance for doubtfu l debts, 31 December 2016 } \
\text { prior to adjustment }
& 1900 \text { (debit) } \
\hline \text { Net credit sales for 2016 } & 178,000\
\hline \text { Accounts written off as uncollectable during 2016 } & 19,000 \
\hline \text { Cash sales during 2016 } & 28,000 \
\hline
\end{array}$$
Bad debts expense is estimated by the ageing of accounts receivable method.Management estimates that $8000 of accounts receivable will be uncollectable.Calculate the Allowance for doubtful debts after the adjustment for bad debt expense at 31 December 2016.

Question

The following information is from the 2016 records of Armand Camera Shop:
$$\begin{array} { | l | l | } 
\hline \text { Accounts receivable, 31 December 2016 }&\$ 45,000 \text { (debit) } \
\hline \text { Allowance for doubtfu l debts, 31 December 2016 } \
\text { prior to adjustment }
 &  1900 \text { (debit) } \ 
\hline \text { Net credit sales for 2016 } & 178,000\ 
\hline \text { Accounts written off as uncollectable during 2016 } & 19,000 \
\hline \text { Cash sales during 2016 } & 28,000 \
\hline
\end{array}$$ 
Bad debts expense is estimated by the ageing of accounts receivable method.Management estimates that $8000 of accounts receivable will be uncollectable.Calculate the Allowance for doubtful debts after the adjustment for bad debt expense at 31 December 2016.

Quizplus · Accepted Answer

The allowance for doubtful debts should be adjusted to reflect the estimated uncollectable amount of $8000. Since the allowance account had a debit balance of $1900 before adjustment, the adjustment needed is $8000 - (-$1900) = $8000 + $1900 = $9900. However, the question asks for the balance after adjustment, which is simply the estimated uncollectable amount: $8000.

The Following Information Is from the 2016 Records of Armand