In 2015, Chandler Company Had Net Credit Sales of $1,125,000

question 21

Multiple Choice

In 2015, Chandler Company had net credit sales of $1,125,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $27,000. During 2015, $42,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis) . If the accounts receivable balance at December 31 was $380,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2015?

• A)$23,000
• B)$38,000
• C)$53,000
• D)$97,500

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Definitions:

Capital Lease

A lease arrangement that transfers substantially all the risks and rewards of ownership of an asset to the lessee, essentially treated as a purchase.

Retained Earnings

The portion of net earnings not paid out as dividends but instead reinvested in the company or used to pay off debt.

Deferred Income Taxes

Taxes applicable on income that is recognized in financial statements in one period but is taxable in another period.

Income Taxes Payable

Income taxes payable is a liability account on a company's balance sheet representing the amount of income taxes that the company owes to the government but has not yet paid.