Question

Wellington Corp. has outstanding accounts receivable totaling $1.27 million as of December 31 and sales on credit during the year of $6.4 million. There is also a debit balance of $6,000 in the allowance for doubtful accounts. If the company estimates that 2% of its accounts receivable will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt?

Answer 1

$25,400

Step-by-step explanation:

On December 31,

Outstanding accounts receivable = $1.27 million = $1,270,000

Sales on credit during the year = $6.4 million

Debit balance in allowance for doubtful accounts = $6,000

Estimates percent of accounts receivable uncollectible = 2%

Therefore,

Allowance balance after all adjustment:

= Outstanding accounts receivable × Estimates percent of accounts receivable uncollectible

= $1,270,000 × 2%

= $25,400