Question

On December 31, Year 3, Alpha Company had an ending balance of $200,000 in its accounts receivable account and an unadjusted (current) balance in its allowance for doubtful accounts account of $300. Alpha estimates uncollectible accounts expense to be 1% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is:

Answer 1

Te answer is: $1,700

Step-by-step explanation:

Alpha Company estimates that its allowance for Doubtful Accounts account should be 1% of Accounts Receivable account; this equals $200,000 x 1% = $2,000.

If at the end of the year, the balance of Doubtful Accounts account was $300, this means only $1,700 of accounts receivable was bad credit. So the actual percentage of bad credit given by the company was 0.85%.