Question

Wellington Corp. has outstanding accounts receivable totaling $3 million as of December 31 and sales on credit during the year of $15 million. There is also a debit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense? $1, 200,000. $ 228,000. $ 240,000. $ 252,000.

Answer 1

The balance in the allowance for doubtful accounts after the year-end adjustment for Wellington Corp. will be $252,000. This calculation accounts for an 8% estimate of uncollectible accounts receivable and an existing $12,000 debit balance in the allowance account.

Step-by-step explanation:

The student is asking about the adjustment of the allowance for doubtful accounts in accordance with accounting principles. Wellington Corp. has outstanding accounts receivable totaling $3 million and estimates that 8% of these receivables will be uncollectible. The existing debit balance in the allowance for doubtful accounts is $12,000. To compute the adjusted balance in the allowance account, multiply the total accounts receivable by the uncollectible percentage rate, which is:

$3,000,000 * 8% = $240,000

Now, since there is a debit balance of $12,000 already in the allowance account, we need to add this amount to the estimated uncollectibles to find the year-end balance for the allowance for doubtful accounts:

$240,000 + $12,000 = $252,000

Therefore, after recording the bad debt expense, the balance in the allowance for doubtful accounts would be $252,000.

Answer 2

Balance in Allowance for Doubtful accounts = $228,000

Step-by-step explanation:

Outstanding Accounts Receivable $3,000,000

(x) Percentage uncollectible 8%

(=) Allowance for Doubtful accounts $240,000

(-) Debit balance $12,000

(=) Balance in Allowance for Doubtful accounts $228,000

Hope this helps!