Question

Black Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $21,000. During 2020, it wrote off $15,120 of accounts and collected $4,410 on accounts previously written off. The balance in Accounts Receivable was $420,000 at 1/1 and $504,000 at 12/31. At 12/31/20, Black estimates that 5% of accounts receivable will prove to be uncollectible. What should Black report as its Allowance for Doubtful Accounts at 12/31/20?

Answer 1

Black report as its Allowance for Doubtful Accounts at 12/31/20 of $25,200

Step-by-step explanation:

The computation of the allowance for the doubtful account is shown below:

= Ending account receivable balance × estimated percentage

= $504,000 × 5%

= $25,200

To find out the allowance for a doubtful account we simply calculate the estimated amount based on the ending balance of the accounts receivable and the given percentage.

All other values are not relevant. Hence, ignored it