Question

In 2022 the Bramble Corp. had net credit sales of $920000. On January 1, 2022, the Allowance for Doubtful Accounts had a credit balance of $22100. During 2022, $33200 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 5% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $232000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2022

Answer 1

The required adjustment to the allowance for doubtful account is $22,700

Step-by-step explanation:

Provision for doubtful debt is an amount usually set aside by the management of an organization against the likely hood of debtors not paying their debt. It is a reduction in accounts receivable in the balance sheet.

Solution;

Adjustment is therefore=

$33,200 - $22,100 + ($232,000 × 5%)

$33,200 - $22,100 + $11,600

$22,700

It is to be noted that last year estimate would be discounted, while write off during the year is added to the period end estimate.