Question

Using the aging-of-accounts-receivable method, you estimate that total uncollectible accounts are $3,800. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $1,100. The amount of the adjusting entry should be:

a) $3,800
b) $4,900
c) $2,700
d) $1,100

Answer 1

The aging-of-accounts-receivable method indicates that the additional amount needed to adjust the Allowance for Uncollectible Accounts to the estimated total of $3,800, with an existing credit balance of $1,100, is $2,700.

Step-by-step explanation:

When applying the aging-of-accounts-receivable method, the goal is to estimate the total uncollectible accounts and adjust the Allowance for Uncollectible Accounts to reflect this estimation. According to the information provided, the estimated total for uncollectible accounts is $3,800. However, there's already a credit balance of $1,100 in the Allowance for Uncollectible Accounts. The adjusting entry to record the estimated uncollectible accounts should bring the allowance account balance to the new estimated total. To do this, we calculate the difference between the estimated total and the existing balance, which is $3,800 - $1,100 = $2,700. This amount represents the additional money that needs to be added to the allowance account to reach the new estimated total of uncollectible accounts.