Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable.During 2016,Chez Fred's credit sales and collections were $125,000 and $131,000,respectively.What was the balance of accounts receivable on January 1,2016,if $180 in accounts receivable were written off during 2016 and if the allowance account had a balance of $750 on December 31,2016?

Question

Quizplus · Accepted Answer

First, we need to calculate the credit sales for the year:

Credit sales = Collections + Ending balance of accounts receivable - Beginning balance of accounts receivable
125,000 = 131,000 + Ending balance - Beginning balance
Ending balance - Beginning balance = -6,000

Since the ending balance is lower than the beginning balance, we know that there were write-offs during the year. We can calculate the beginning balance as follows:

Beginning balance = Ending balance + Sales - Collections - Write-offs
Beginning balance = 180 + 125,000 - 131,000 - 750
Beginning balance = $31,180

Therefore, the answer is (C) $31,180.

Chez Fred Bakery Estimates the Allowance for Uncollectible Accounts at 3