Question

Concord Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of $36500. During 2020, it wrote off $30500 of accounts and collected $8600 on accounts previously written off. The balance in Accounts Receivable was $780000 at 1/1 and $940000 at 12/31. At 12/31/20, Concord estimates that 5% of accounts receivable will prove to be uncollectible. What should Concord report as its Allowance for Doubtful Accounts at 12/31/20

Answer 1

$32,400

Step-by-step explanation:

According to the situation for computation of Allowance for Doubtful Accounts at 12/31/20 first we need to find out the actual balance which is shown below:-

Actual balance = Beginning Balance of Allowance + Amount reinstated - Amount written off + Uncollectible account expenses

= $36,500 + $8,600 - $30,500

= $14,600

Ending balance of Allowance = Balance of accounts receivables × Accounts receivable percentage at 12/31 - Actual balance

= $940,000 × 5% - $14,600

= $47,000 - $14,600

= $32,400

Therefore for reaching the ending balance of allowance we simply applied the above formula.