Question

In 2022 the Wildhorse Co. had net credit sales of $960000. On January 1, 2022, the Allowance for Doubtful Accounts had a credit balance of $22500. During 2022, $33600 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 15% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $236000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2022?

Answer 1

$46,500

Step-by-step explanation:

The computation of the required adjustment to the Allowance for Doubtful Accounts is shown below:

= Ending balance of account receivable × estimated percentage + balance in allowance account

where,

Balance in allowance account is

= $22,500 - $33,600

= $11,100

So, the adjustment made is

= $236,000 × 15 % + $11,100

= $46,500