Question

Jumpin Corporation uses the percentminusofminussales method to estimate uncollectibles. Net credit sales for the current year amount to $ 2 comma 100 comma 000​, and management estimates 4​% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a debit balance of $ 1 comma 400. The amount of UncollectibleminusAccount Expense reported on the income statement will​ be:

Answer 1

Uncollectible-Account Expense = $84,000

Step-by-step explanation:

First of all, we are told that the percentage of uncollectible sales is 4%. This means that out of the total credit sales, 4% is estimated as not being paid by the debtors, and this is the amount that will be recorded in the income statement. It is calculated as follows:

Percentage of uncollectible sales = 4% = 4/100 = 0.04

Total sales = $2,100,000

∴ Uncollectible-Account Expense = 0.04 × 2,100,000 = $84,000