Question

The following information relates to Jay Co.'s accounts receivable for 2016:

Accounts receivable balance, 1/1/2016
$ 650,000
Credit sales for 2016
2,700,000
Sales returns during 2016
75,000
Accounts receivable written off during 2016
40,000
Collections from customers during 2016
2,150,000
Allowance for uncollectible accounts balance, 12/31/2016
110,000
What amount should Jay report for accounts receivable, before allowances, at December 31, 2016?
a) $925,000
b) $1,085,000
c) $1,125,000
d) $1,200,000

Answer 1

Jay Co. should report an accounts receivable balance of $1,085,000, before allowances, on December 31, 2016. This is calculated by adjusting the beginning balance with credit sales, sales returns, write-offs, and collections during the year.

Step-by-step explanation:

To calculate the amount Jay Co. should report for accounts receivable, before allowances, at December 31, 2016, we need to adjust the beginning balance of accounts receivable with the transactions that occurred during the year. The calculation is as follows:

• Beginning accounts receivable balance, 1/1/2016: $650,000
• Add: Credit sales for 2016: $2,700,000
• Less: Sales returns during 2016: $75,000
• Less: Accounts receivable written off during 2016: $40,000
• Less: Collections from customers during 2016: $2,150,000

The adjusted accounts receivable balance is calculated:

$650,000 + $2,700,000 - $75,000 - $40,000 - $2,150,000 = $1,085,000.

Therefore, the amount that should be reported for accounts receivable, before allowances, on December 31, 2016, is $1,085,000 (Option b).