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Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases and indicate the ending balance in each case.
(a) Credit balance of $360 in Allowance for Doubtful Accounts just prior to adjustment. Analysis of Accounts Receivable indicates uncollectible receivables of $8,540.
Amount added: $????
Ending balance: $????
(b) Credit balance of $360 in Allowance for Doubtful Accounts just prior to adjustment. Uncollectible receivables are estimated at 1% of credit sales, which totaled $1,036,000 for the year.
Amount added: $????
Ending balance: $????
1 Answer
- 8 years agoFavorite Answer
a) The balance of the Allowance for Doubtful accounts is $360, and the question indicates that there is a forecast of uncollectible receivables of $8,540
So the amount added, is $8,540 and it is being credited because it is a contra asset account. Assets increase by debit, so a contra increases by credit.
Amount Added:$8,540
Ending Balance: 8540+360=$8900
b)
Again, the balance in the account is $360, and the company estimates that 1% of their annual sales will eventually become uncollectible.
1% * $1,036,000=$10,360
Credit to the account again.
Amount Added:$10,360
Ending Balance: 10360+360=$10,720
