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Homework answers / question archive / Arundel Company uses percentage of sales to estimate uncollectibles

Arundel Company uses percentage of sales to estimate uncollectibles

Accounting

Arundel Company uses percentage of sales to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance of $78,000 and had a total of $700,000 in credit sales. Arundel assumes that 2.0% of sales will eventually be uncollectible. before adjustment, the Allowance for Uncollectible Accounts had a credit balance of 6,000. What dollar amount should be credited to Allowance for Uncollectible Accounts at year end?

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Computation of Dollar Amount should be credited to Allowance for Uncollectible Accounts at year end:

The estimated uncollectible amount is 2% of sales.

2% of $700,000

$14,000

Dollar Amount should be credited to Allowance for Uncollectible Accounts at year end = $14,000 - $6,000 = $8,000

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