A company reports the following amounts at the end of the year (before any year-end adjustment). Record the adjustment for uncollectible accounts (1) using the percentage-of-receivables method, assuming the company estimates 10% of receivables will not be collected, and (2) using the percentage-of-credit-sales method, assuming the company estimates 2% of credit sales will not be collected.

Question

A company reports the following amounts at the end of the year (before any year-end adjustment).  Record the adjustment for uncollectible accounts (1) using the percentage-of-receivables method, assuming the company estimates 10% of receivables will not be collected, and (2) using the percentage-of-credit-sales method, assuming the company estimates 2% of credit sales will not be collected.

Quizplus · Accepted Answer

(1) Adjustment = ($36,000 $\times$ 10%) - $1,500 = $2,100.
(2) Adjustment = $120,000 $\times$ 2% = $2,400.

A Company Reports the Following Amounts at the End of the Year