Question

Warner Company’s year-end unadjusted trial balance shows accounts receivable of \(99,000, allowance for doubtful accounts of \)600 (credit), and sales of \(280,000. Uncollectibles are estimated to be 1.5% of accounts receivable.

2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of \)300?

Short answer

The correct answer is$4,500.

Step-by-step solution

Introduction

The amount of adjusting entry used in the year-end will be calculated using the amount of sales and the percentage of the uncollectible along with the debit balance of the allowance account.

Calculation of the year-end adjusting entry

$\begin{array}{rcl}\mathrm{Amount}\mathrm{used}\mathrm{in}\mathrm{year}\mathrm{end}\mathrm{adjusting}\mathrm{entry}& =& \left(\mathrm{Sales}\times \mathrm{Uncollectible}\right)+\mathrm{Debit}\mathrm{balance}\\ & =& \left(\$280,000\times \frac{1.5}{100}\right)\times \$300\\ & =& \$4,200+\$300\\ & =& \$4,500\end{array}$