Question

Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2018, Chez Fred's credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2018, if $180 in accounts receivable were written off during 2018 and if the allowance account had a balance of $750 on December 31, 2018?

a. $5,820.
b. $31,000.
c. $31,180.
d. None of these answer choices are correct.

Answer 1

The balance of accounts receivable on January 1, 2018, was $5,820.

Step-by-step explanation:

To find the balance of accounts receivable on January 1, 2018, we need to consider the changes that occurred during 2018. We know that credit sales were $125,000 and collections were $131,000. Additionally, $180 in accounts receivable were written off during the year. The allowance account had a balance of $750 on December 31, 2018.

To find the balance of accounts receivable on January 1, 2018, we can use the formula:

Beginning balance + Credit sales - Collections - Write-offs = Ending balance

Let's plug in the given values:

Beginning balance + $125,000 - $131,000 - $180 = $750

Therefore, the balance of accounts receivable on January 1, 2018, was $5,820.