Question

At the end of year 1, Boller Co. had an ending balance in allowance for uncollectible accounts of $30,000. During year 2, Boller wrote off $40,000 of accounts receivable. At the end of year 2, Boller had $300,000 in accounts receivable and determined that 8% of these would be uncollectible. What amount should be reported as uncollectible accounts expense on Boller's year 2 income statement?

Answer 1

$34,000

Explanation:

First they had 30,000

Then wrote off 40,000

So balance is 30,000 - 40,000 = -10,000

Now, they want 8% of 300,000 as uncollectible. So that would be

0.08 * 300,000 = 24,000

Thus, to bring the balance to 24,000 [balance is -10,000], how much would they need to add?? Let it be x:

-10,000 + x = 24,000

x = 24,000 + 10,000 = $34,000