Question

Max Company for the month of December: Beginning balance of uncollectible accounts on December 1st: $10,000...

Max Company for the month of December:

Beginning balance of uncollectible accounts on December 1st: $10,000 credit balance

Percentage of sales for the uncollectible accounts during the period: 3%

Net Sales: $500,000

Required: (1) What is the uncollectible accounts expense on December 31st?

(2) What is the uncollectibe accounts expense on December 31st if beginning

balance of the uncollectible accounts is a $5,000 debit balance?

Business   Accounting   
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Answer #1

Requirement 1

Uncollectible accounts expense= $15,000

.

Uncollectible accounts expense is calculated as Sales revenue x 3%

Uncollectible accounts expense= 500000 x 3%= $15,000

Requirement 2

Uncollectible accounts expense= $15,000

.

Uncollectable account expense remain same whatever the balance is in the uncollectible account. The unadjusted balance in uncollectible accounts is adjusted for uncollectible accounts expense only when the balance sheet approach is used. In income statement appraoch adjustment is not done.

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