Question

Morrow Inc. uses the percentage of credit sales method of estimating doubtful accounts. The Allowance for Doubtful Accounts has an unadjusted credit balance of $3,300 and the company had $170,000 of net credit sales during the period. Morrow has experienced bad debt losses of 6% of credit sales in prior periods. After making the adjusting entry for estimated bad debts, what is the ending balance in the Allowance for Doubtful Accounts account

Answer 1

$13,500

Step-by-step explanation:

The computation of the ending balance in the allowance for doubtful accounts is shown below:

= Unadjusted credit balance of allowance for doubtful accounts + net credit sales × estimated bad debts losses percentage

= $3,300 + $170,000 × 6%

= $3,300 + $10,200

= $13,500

Basically we applied the above formula to find out the ending balance in the allowance for doubtful accounts