Question

Roster Co. adjusts its Allowance for Doubtful Accounts at year end. The general ledger balances for the Accounts Receivable and the related allowance account before adjustment were $1,500,000 and $45,000, respectively. Roaster estimates its necessary balance in its Allowance for Doubtful Accounts as 4% of the Accounts Receivable balance. What amount should Roaster record as an adjustment to its Allowance for Doubtful Accounts at year end

Answer 1

"$15,000" is the appropriate answer.

Step-by-step explanation:

Debts opening balance,

= $45,000

According to the question,

The allowance to be created for the doubtful accounts will be:

=
`1500000* 4 \ percent`

=
`1500000* 0.04`

=
`60,000` ($)

hence,

The balance amount to be created will be:

=
`60000-45000`

=
`15,000` ($)