Suppose at the end of the year before any adjusting entries,a company has a balance in Allowance for Uncollectible Accounts of $5,000 (debit).During the year,the company reported the following amounts:
Credit sales to customers = $550,000
Cash collections from customers = $540,000
Actual bad debts = $20,000
What was the balance of Allowance for Uncollectible Accounts at the beginning of the year?

Question

Suppose at the end of the year before any adjusting entries,a company has a balance in Allowance for Uncollectible Accounts of $5,000 (debit).During the year,the company reported the following amounts: 
Credit sales to customers = $550,000
Cash collections from customers = $540,000
Actual bad debts = $20,000
What was the balance of Allowance for Uncollectible Accounts at the beginning of the year?

Quizplus · Accepted Answer

The beginning balance of the Allowance for Uncollectible Accounts can be determined by adjusting the end-of-year balance for the activities during the year. The end-of-year balance is a $5,000 debit, which is unusual for this account as it typically has a credit balance. The actual bad debts of $20,000 would have been written off against this allowance, reducing its balance. To have a debit balance of $5,000 after writing off $20,000, the account must have had a beginning balance of $15,000 credit. This is because when $20,000 is written off, it would normally reduce a credit balance or increase a debit balance. To end with a $5,000 debit balance after writing off $20,000, the account must have started with a $15,000 credit balance ($15,000 - $20,000 = -$5,000, which is a $5,000 debit balance).

Suppose at the End of the Year Before Any Adjusting