Question

At the beginning of Year 3 Omega Company had a $52,000 balance in its accounts receivable account and a $1,400 balance in allowance for doubtful accounts. During Year 3, Omega experienced the following events.

(1) Earned $220,000 of revenue on account.
(2) Collected $230,000 cash from accounts receivable.
(3) Wrote off $1,000 of accounts receivable as uncollectible.
Omega estimates uncollectible accounts to be 4% of receivables. Based on this information, the amount of uncollectible accounts expense shown on the Year 3 income statement is

Answer 1

The amount of uncollectible accounts expense shown on the Year 3 income statement is $8,800.

Step-by-step explanation:

The amount of uncollectible accounts expense shown on the Year 3 income statement can be calculated by determining the ending balance in the allowance for doubtful accounts account. To find this balance, we start with the beginning balance of $1,400 and add the estimated amount of uncollectible accounts for the year. Since Omega estimates uncollectible accounts to be 4% of receivables, we can calculate the estimated uncollectible accounts as $220,000 * 0.04 = $8,800. Therefore, the ending balance in the allowance for doubtful accounts account is $1,400 + $8,800 = $10,200.

The uncollectible accounts expense shown on the Year 3 income statement is the increase in the allowance for doubtful accounts from the beginning balance to the ending balance. Therefore, the uncollectible accounts expense is $10,200 - $1,400 = $8,800.