Question

On december 31, 2021, when its allowance for doubtful accounts had a debit balance of $1,521, Sheridan Company estimates that 9% of its accounts receivanle balance of $105,300 will become uncollectable and records the necessary adjustments to allowance for doubtful accounts. On May 11, 2022, Sheridan company determined that B.Jared's accounts was uncollectable and wrote off $1,165. On June 12th, 2022, Jared paid the amount previously written off.

Answer 1

As of June 12, 2022, after B. Jared paid the previously written-off amount, Sheridan Company's allowance for doubtful accounts should have a debit balance of $356. This is calculated by subtracting the amount written off ($1,165) from the initial debit balance ($1,521) and adjusting for the subsequent payment.

Step-by-step explanation:

The initial estimation of uncollectible accounts on December 31, 2021, was made based on 9% of the accounts receivable balance of $105,300. This amounted to 0.09 \times $105,300 = $9,477. The adjustment to the allowance for doubtful accounts on that date was $9,477 - $1,521 = $7,956.

When Sheridan Company determined on May 11, 2022, that B. Jared's account was uncollectible and wrote off $1,165, the allowance for doubtful accounts was further reduced. The calculation is $7,956 - $1,165 = $6,791. However, when B. Jared paid the previously written-off amount on June 12, 2022, this payment needed to be reflected in the allowance for doubtful accounts. Adding the payment back to the written-off amount: $6,791 + $1,165 = $7,956.

Therefore, as of June 12, 2022, the allowance for doubtful accounts should have a debit balance of $356, calculated by subtracting the remaining written-off amount ($1,165) from the initial debit balance ($1,521). This reflects the adjustments made for the estimated uncollectible accounts and the subsequent payment received.