At the end of the current year (before adjusting entries), Autumn Corporation had a balance of $76,000 in Accounts Receivable and a credit balance of $11,000 in Allowance for Uncollectible Accounts. Service revenue (all on credit) for the year totaled $490,000.
Requirement 1:
Using the percent-of-sales method, calculate the amount of Uncollectible-Account Expense if Vacay Corporation estimates its uncollectible-account expense using a rate of 5% of credit sales.
What is the ending balance of the Allowance for Uncollectible Accounts under this scenario?
Requirement 2:
Now assume that Vacay Corporation uses the aging-of-receivables method. Vacay Corporation estimates that its Allowance for Uncollectible Accounts should have a credit balance of $27,000.
Calculate the amount of its Uncollectible-Account Expense.
What is the ending balance of the Allowance for Uncollectible Accounts under this scenario?