Chez Fred Bakery estimates the allowance for uncollectible accounts at 2% of the ending balance of accounts receivable. During 2021, Chez Fred's credit sales and collections were $113,000 and $132,000, respectively. What was the balance of accounts receivable on January 1, 2021, if $120 in accounts receivable were written off during 2021 and if the allowance account had a balance of $930 on December 31, 2021?
None of these answer choices are correct.
Credit sales = $113,000
Cash collection = $132,000
Accounts receivable written off = $120
Allowance for doubtful accounts, ending = $930
Allowance for doubtful accounts, ending = 2% of ending accounts receivable
930 = Ending accounts receivable x 2%
Ending accounts receivable = $46,500
Ending accounts receivable = Beginning accounts receivable + Credit sales -Cash collection -Accounts receivable written off
46,500 = Beginning accounts receivable+113,000-132,000-120
Beginning accounts receivable = $65,620
The balance of accounts receivable on January 1, 2021 = $65,620
Third option is correct.
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