Question

Chez Fred Bakery estimates the allowance for uncollectible accounts at 1% of the ending balance of accounts receivable. During 2018, Chez Fred's credit sales and collections were $106,000 and $142,000, respectively. What was the balance of accounts receivable on January 1, 2018, if $140 in accounts receivable were written off during 2018 and if the allowance account had a balance of $960 on December 31, 2018?

Answer 1

Allowance for uncollectible accounts = $960
Allowance for uncollectible accounts = 1% * Ending Accounts Receivable
$960 = 1% * Ending Accounts Receivable
Ending Accounts Receivable = $96,000

Write-offs = $140
Credit Sales = $106,000
Collections = $142,000

Ending Accounts Receivable = Beginning Accounts Receivable + Credit Sales - Collections - Write-offs
$96,000 = Beginning Accounts Receivable + $106,000 - $142,000 - $140
Beginning Accounts Receivable = $132,140

So, Balance of accounts receivable on January 1, 2018 is $132,140