Question

The following information is from the 2015 records of Armadillo Camera Shops.

Accounts Receivable, December 31, 2015 $330,000 (debit)
Allowance for uncollectible accounts, January 1, 2015 30,000 (credit)
Net sales for 2015 1,500,000
Accounts written off as uncollectible during 2015 25,500
Uncollectible accounts expense is estimated by the percent-of-sales method. Management estimates that 2% of net sales are uncollectible. Which of the following will be the 12/31/15 balance in the allowance for uncollectible accounts?
A) $25,500
B) $30,000
C) $34,500
D) $30,500

Answer 1

D I sure that is D as the correct answer

Answer 2

The 12/31/15 balance in the allowance for uncollectible accounts will be B) $30,000.

Step-by-step explanation:

To calculate the balance in the allowance for uncollectible accounts, we need to determine the amount of uncollectible accounts expense for 2015. The uncollectible accounts expense is estimated by the percent-of-sales method, which states that a certain percentage of net sales will be uncollectible. In this case, management estimates that 2% of net sales are uncollectible.

To calculate the uncollectible accounts expense, we multiply the net sales for 2015 by the estimated percentage: 1,500,000 * 0.02 = $30,000.

Since the allowance for uncollectible accounts had a credit balance of $30,000 on January 1, 2015, and there were no additional credits or increases during the year, the 12/31/15 balance in the allowance for uncollectible accounts will also be $30,000.