Question

At January 1, 2013, Simpson Co. had a credit balance of $260,000 in its allowance for uncollectible accounts. Based onpast experience. 2 percent of Simpson's credit sales have been uncollectible. During 2013. Simpson wrote off 5325.000 ofaccounts receivable. Credit sales for 2013 were $9.000,000. In its December 31. 2013. balance sheet, what amount shouldSimpson report as allowance for uncollectible accounts?a. 5115.000b. 5180.000c. $245,000d. $440,000

Answer 1

Option (a) is correct.

Step-by-step explanation:

Given that,

Allowance for uncollectible accounts balance January 1 = $260,000

Accounts receivable Written off = $325,000

Credit sales for 2013 = $9,000,000

Percent of Credit sales uncollectible = 2%

Allowance for uncollectible accounts balance December 31:

= Allowance for uncollectible accounts balance January 1 - Written off + Bad debts expense

= $260,000 - $325,000 + (,9000,000 × 2%)

= $260,000 - $325,000 + $180,000

= $115,000