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As of January 1, 2016, Farley Co. had a credit balance of $537,000 in its allowance...

As of January 1, 2016, Farley Co. had a credit balance of $537,000 in its allowance for uncollectible accounts. Based on experience, 4% of Farley's credit sales have been uncollectible. During 2016, Farley wrote off $635,000 of accounts receivable. Credit sales for 2016 were $19,800,000. In its December 31, 2016, balance sheet, what amount should Farley report as allowance for uncollectible accounts?

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Answer #1

Allowance for doubtful accounts as on Jan 1, 2016

537000

Less: W/off uncollectable

-6,35,000

Add: Bad debts accounts expense for 2013 (4% of 19,800,000)

792000

Allowance for doubtful accounts as on Dec 31, 2016

6,94,000

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