As of January 1, 2021, Farley Co. had a credit balance of $522,000 in its allowance for uncollectible accounts. Based on experience, 3% of Farley's credit sales have been uncollectible. During 2021, Farley wrote off $634,000 of accounts receivable. Credit sales for 2021 were $18,900,000. In its December 31, 2021, balance sheet, what amount should Farley report as allowance for uncollectible accounts

($455,000)

Explanation:

When sales are made on account, the entries required are;

Debit Sales/Revenue

Credit Accounts Receivables

The company may then estimate that part of the receivables may be uncollectible. For this, entries required are;

Debit Bad debts expense

Credit Allowance for doubtful debt (B/s)

When the amounts provided for becomes uncollectible, the entries then become

Debit Allowances for doubtful debts

Credit Accounts receivables

to write off the amount from account receivables.

Hence where 3% of Farley's credit sales have been uncollectible, this amounts to

= 3% of $18,900,000

= $567,000

Considering the above entries

Amount to be reported as allowance for uncollectible at 31 December, 2021

= ($522,000) + $634,000 + ($567,000)

= ($455,000)