Question

Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2021, Chez Fred's credit sales and collections were $118,000 and $148,000, respectively. What was the balance of accounts receivable on January 1, 2021, if $120 in accounts receivable were written off during 2021 and if the allowance account had a balance of $600 on December 31, 2021

Answer 1

$50,120

Step-by-step explanation:

Account receivable on December 31, 2021 × 3% = 600

Account receivable on December 31, 2021 = $600 ÷ 3% = $20,000

Accounts receivable on January 1, 2021 = $20,000 - $118,000 + $148,000 + $120 = $50,120

Therefore, the balance of accounts receivable on January 1, 2021 is $50,120.