Snead Company uses the aging method to adjust the allowance for uncollectible ac

Question

Snead Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, 2016, the balance of accounts receivable is $210,000 and the allowance for uncollectible accounts has a credit balance of $3,000 (before adjustment). An analysis of accounts receivable produced the following age groups Click to open the accounts receivable aging information.) Based on past experience, Snead estimates that the percentage of accounts that will prove to be uncollectible within the three age groups is 4%, 10%, and 18% respectively. Based on these facts, the adjusting entry for uncollectible accounts should be made in the amount of O A. $14,960 O B. $11,960 O c. $8,960 O D. $15,960 Data Table 160,000 43,000 7,000 210,000 60 days past due Over 60 days past due . . . .. Print Done Click to select your answer

Explanation / Answer

Solution:

Balance in Allowance for Uncollectible Account (Unadjusted) = $3,000

Estimated Uncollectible Amount total = $11,960

Uncollectible account to adjusted = Total estimated uncollectible amount - Balance in Allowance for uncollectible account = $11960 - $3000 = $8,960

Therefore Adjusting entry to be made in the amount of $8,960

Hence option "C" is correct.

Age Group Amount % uncollectible Uncollectible Amount Current $160,000.00 4% $6,400.00 60 days past due $43,000.00 10% $4,300.00 over 60 days past due $7,000.00 18% $1,260.00 Totals $210,000.00 $11,960.00

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