Question

A company has net credit sales of $950,000 for the year and it estimates that uncollectible accounts will be 2% of sales. If Allowance for Doubtful Accounts has a credit balance of $2,000 prior to adjustment, its balance after adjustment will be a credit of _______.

a. $17,000.
b. $19,000.
c. $19, 040.
d. $21,000.

Answer 1

a. $17,000.

Step-by-step explanation:

The computation of the balance after adjustment is

= Net credit sales × estimated percentage - credit balance of Allowance for doubtful debts

= $950,000 × 2% - $2,000

= $19,000 - $2,000

= $17,000

We simply applied the above formula so that the adjusted balance could come

Hence, the first option is correct