Question

For 2021, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $86,500 and $2,100, respectively, at December 31, 2020. During 2021, Rahal's credit sales and collections were $404,000 and $408,000, respectively, and $2,340 in accounts receivable were written off. Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021, is:_________

Answer 1

To find Rahal's final balance in its allowance for uncollectible accounts, begin with the starting balance, add the bad debt expense calculated as 1% of credit sales, and then subtract any receivables written off. The final balance is $3,800.

Step-by-step explanation:

To calculate the ending balance in the allowance for uncollectible accounts, we need to follow several steps based on the percentage of sales method. This method estimates the bad debt expense as a percentage of credit sales for the period.

1. Start with the beginning balance of the allowance account, which is $2,100.
2. Calculate bad debt expense for the year: 1% of $404,000 in credit sales equals $4,040.
3. Add the bad debt expense calculated to the beginning balance of the allowance account: $2,100 + $4,040 = $6,140.
4. Subtract any write-offs of receivables during the year: $6,140 - $2,340 = $3,800.

Therefore, the final balance in Rahal's allowance for uncollectible accounts at December 31, 2021, is $3,800.

Answer 2

$80,160.

Step-by-step explanation:

An account receivable is lawfully enforceable cases for installment, held by a business for the products provided and benefits that clients/customers have requested yet not paid for.

According to Rahal's autos noncollectable accounts and the amount they received in the following year. Rahal's collectible accounts on December 31, 2021, is

86,500 + 404,000 - 408,000 - 2,340