Question

Kolker Company uses the​ percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $ 150 comma 000​, and management estimates 4​% will be uncollectible. Kolker ​Company's balance of Allowance for Uncollectible Accounts after​ adjustments, was $ 4 comma 000. The following​ year, Kolker Company wrote off $ 3 comma 000 of old receivables as uncollectible. What is the balance in the Allowance account​ now?

Answer 1

$7,000

Step-by-step explanation:

The previous balance of the allowance for uncollectible accounts was $4,000, then $3,000 were written off, so the new balance = $4,000 - $3,000 = $1,000

if current sales are estimated at $150,000 and 4% will be uncollectible, then you should add $150,000 x 4% = $6,000 to the allowance for uncollectible accounts.

The current account balance should be $1,000 + $6,000 = $7,000