At the End of the Current Year, the Trial Balance

question 73

Short Answer

At the end of the current year, the trial balance of Cary's Craft Shop included the accounts and balances shown below. Credit sales were $290,000. Returns and allowances on these sales were
$4,000. Assume that the firm bases its estimate of the loss from uncollectible accounts on 0.3 percent of net credit sales.
Accounts Receivable $ 36,000 Dr.
Allowance for Doubtful Accounts 1,000 Dr.
1. What is the estimated loss from uncollectible accounts for the current year?
2. What is the amount of the adjusting entry for the estimated loss from uncollectible accounts?

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Definitions:

Investing Activities

Financial transactions that relate to the acquisition or sale of assets, investments, and other long-term items that are not part of the company's primary operations.

Amortization

The process of gradually reducing the cost of an intangible asset through scheduled charges to expense over its useful life.

Indirect Method

A technique used in cash flow statement preparation that adjusts net income for changes in non-cash accounts to calculate cash flow from operating activities.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.