Question

Foster Co. adjusted its allowance for uncollectible accounts at year-end. The general ledger balances for the accounts receivable and the related allowance account were $1,000,000 and $40,000, respectively. Foster uses the percentage-of-receivables method to estimate its allowance for uncollectible accounts. Accounts receivable were estimated to be 5% uncollectible. What amount should Foster record as an adjustment to its allowance for uncollectible accounts at year-end

Answer 1

$10,000

Step-by-step explanation:

The computation of the amount should Foster record as an adjustment to its allowance for uncollectible accounts at year-end is shown below"

= $1,000,000 × 5% - $40,000

= $50,000 - $40,000

= $10,000

Hence, the amount that should be recorded is $10,000