Question

History indicates that 9 % of a company's net sales are uncollectible. the balance of accounts receivables is $ 170,280. the company sales are $ 986,356 and sales returns and allowances are 20,310. if allowance for doubtful accounts has a $ 5,635 credit balance, the adjustment, rounding to the nearest one dollar, to record the estimate for bad debts for the period will require a credit to the allowance of doubtful accounts of $_________.

Answer 1

To record the estimate for bad debts, the adjustment needed for the allowance for doubtful accounts is a credit of $81,309.

To record the estimate for bad debts, we need to calculate the amount of uncollectible sales. We can start by finding the total sales returns and allowances, which is $20,310. Then, we can calculate the net sales by subtracting the sales returns and allowances from the total sales: $986,356 - $20,310 = $966,046. Next, we need to find the amount of uncollectible sales by multiplying the net sales by the percentage of uncollectible sales: $966,046 * 0.09 = $86,944. Lastly, we can calculate the adjustment needed for the allowance for doubtful accounts by subtracting the existing credit balance from the amount of uncollectible sales: $86,944 - $5,635 = $81,309.