Question

At the end of the year, Mercy Cosmetics’ balance of Allowance for Uncollectible Accounts is $450 (credit) before adjustment. The balance of Accounts Receivable is $17,500. The company estimates that 15% of accounts will not be collected over the next year. What adjustment would Mercy Cosmetics record for Allowance for Uncollectible Accounts?

Answer 1

Mercy Cosmetics

Adjustment to record for Allowance for Uncollectible Accounts is:

$2,175

Step-by-step explanation:

The Allowance for Uncollectible Accounts = $450 credit before adjustment .

After adjustment the Allowance for Uncollectible Accounts will equal $2,625 (15% of $17,500).

So the adjustment for the period is to debit the Uncollectible Expense account with $2,175 and then credit the Allowance for Uncollectible Accounts with $2,175. This adjustment brings the Allowance for Uncollectible Accounts to $2,625 as stated earlier.