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27 May, 05:48

Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $82,000 and $4,500, respectively. During Year 2, Allegheny wrote off $8,400 of Uncollectible Accounts. Using the percent of receivables method, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $6,800. What amount will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

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  1. 27 May, 06:01
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    Answer: $10,700

    Explanation:

    The Uncollectible Account Expense is the Accounting Adjustment made when a Receivable defaults on their debt and it can be calculated using the following formula,

    = Uncollectible Amount written off + Closing Balance - Opening Balance.

    Now the balances are as follows,

    Opening Balance for Year 2 = 4,500

    Closing Balance for Year 2 = 6,800

    Uncollectible Amount written off during Year 2 = 8,400

    Calculating therefore,

    = 6,800 + 8,400 - 4,500

    = $10,700

    Allegheny will report $10,700 as Uncollectible Accounts Expense for Year 2.
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