Question

A trial balance before adjustments included the following:

Debit Credit
Sales $850,000
Sales returns and allowance $28,000
Accounts receivable 86,000
Allowance for doubtful accounts 1,520

If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the adjustment is
a. $13,400.
b. $16,440.
c. $17,000.
d. $19,480.

If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment is
a. $7,080.
b. $8,600.
c. $8,448.
d. $10,120.

Answer 1

The adjustment for uncollectible accounts can be calculated using two different methods: taking a percentage of net sales or taking a percentage of gross accounts receivable.

Step-by-step explanation:

The adjustment for uncollectible accounts can be calculated using two different methods: taking a percentage of net sales or taking a percentage of gross accounts receivable.

If the estimate is made by taking 2% of net sales, the adjustment would be $17,000. This can be calculated by multiplying $850,000 (net sales) by 2% to get $17,000.

If the estimate is made by taking 10% of gross accounts receivable, the adjustment would be $8,600. This can be calculated by multiplying $86,000 (gross accounts receivable) by 10% to get $8,600.