Determine the Amount to Be Added to Allowance for Doubtful

question 43

Short Answer

Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases:
(a) Balance of $3,000 in the allowance account just prior to adjustment. Analysis of accounts receivable indicates doubtful accounts of $25,000.
(b) Balance of $500 in the allowance account just prior to adjustment. Uncollectibles are estimated at 2% of sales, which totaled $800,000 for the year.

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Definitions:

Retained Earnings

The amount of net income retained in the corporation.

Cash Dividends

Distributions of profits by a company to its shareholders in the form of cash.

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and other investments not included in cash equivalents.

Loans Receivable

Loans receivable are amounts owed to a lender by borrowers, recognized as assets on the lender's balance sheet.