Calistoga Produce estimates bad debt expense at 0.50% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $487,000 and $1,610 respectively, at December 31, 2015. During 2016, Calistoga's credit sales and collections were $318,000 and $312,000, respectively, and $1,750 in accounts receivable were written off.

Calistoga's adjusted allowance for uncollectible accounts at December 31, 2016, is:

(A) $2,335.

(B) $1,355.

(C) $2,100.

(D) $1,450.

Question

Business

Amirah Kim

14 August, 05:28

Calistoga Produce estimates bad debt expense at 0.50% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $487,000 and $1,610 respectively, at December 31, 2015. During 2016, Calistoga's credit sales and collections were $318,000 and $312,000, respectively, and $1,750 in accounts receivable were written off.

Calistoga's adjusted allowance for uncollectible accounts at December 31, 2016, is:

(A) $2,335.

(B) $1,355.

(C) $2,100.

(D) $1,450.

+2

Answers (1)

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Julianna Cordova · Answer 1

(D) $ 1,450

Explanation:

The ending balance in allowance for uncollectible accounts is calculated by the following equation.

Opening Balance + Allowance for the year - Receivables written off = Ending Balance

$ 1,610 + $ 1,590 (0.5 % of sales on credit, $ 318,000 * 0.5%) - $ 1,750 (Receivables written off) = Adjusted allowance for uncollectible accounts $ 1,450

The amounts collected are not relevant in calculating the ending balalnce