Caudill Sales Company made most of its sales on credit during its first year of operation,2014.At the end of the year,accounts receivable amounted to $100,000.On December 31,2014,management reviewed the collectible status of the accounts receivable.Approximately $6,000 of the $100,000 of accounts receivable were estimated to be uncollectible.As per the accounts receivable aging method the adjusting entry that would be made on December 31 of that year is:

Question

Quizplus · Accepted Answer

The adjusting entry for estimated uncollectible accounts would decrease the amount of accounts receivable and recognize the expense of uncollectible accounts. According to the question, the estimated uncollectible amount is $6,000. Therefore, the correct answer is (C) Uncollectible Accounts Expense 6,000 Allowance for Uncollectible Accounts 6,000. This would result in an increase in the allowance for uncollectible accounts on the balance sheet and an expense on the income statement. Option (B) would be incorrect because it overestimates the allowance for uncollectible accounts. Option (D) would increase the allowance for uncollectible accounts but it would also decrease accounts receivable by the same amount, which is not accurate since the estimated uncollectible accounts amount is only $6,000. Option (A) only records the expense of uncollectible accounts and does not account for the estimated amount in the allowance for uncollectible accounts.

Caudill Sales Company Made Most of Its Sales on Credit