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The balance of accounts receivable is $75,000 as of end of the period. Prior to adjustment,...

The balance of accounts receivable is $75,000 as of end of the period. Prior to adjustment, the allowance for uncollectible accounts has a credit balance of $7,200. Income statement approach is used to estimate expected uncollectible accounts. Net credit sales for the year were $280,000 and cash sales were $168,000. Historical data indicates that approximately 3% of net credit sales are uncollectible.

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Answer #1

Given that 3% of net credit sales for the year are uncollectible.

Hence uncollectible accounts receivable for the year end are amounting to $8400

Whereas opening credit balance in allowance for uncollectible accounts was $7200

Now we have pass journal entry for the difference amount of $1200. Below is the journal entry to be passed:

Date Particulars Reference Debit ($) Credit ($)
Year End Bad Debt Expense dr 1200
To Allownce for uncollectible accounts 1200
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