The General Ledger Account for Accounts Receivable Shows a Debit

question 2

Multiple Choice

The general ledger account for Accounts Receivable shows a debit balance of $25,000. Allowance for Uncollectible Accounts has a credit balance of $1,500. Net sales for the year were $250,000. In the past, 3 percent of sales have proved uncollectible, and an aging of accounts receivable resulted in an estimate of $10,000 of uncollectible accounts receivable. Using the percentage of net sales method, the Allowance for Uncollectible Accounts balance (after adjustment) would be

• A) $7,500.
• B) $10,000.
• C) $9,000.
• D) $6,000.

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Definitions:

Recognize Assets

The process of recording an item in the financial statements as an asset, acknowledging its probable future economic benefits.

Derecognize

The removal of an asset or liability from a company's financial statements, often due to it being sold, fully depreciated, or disposed of.

Reclassify Items

The process of moving accounting entries from one ledger or category to another to correct or clarify financial statements during the preparation process.

FASB-IASB Convergence

The ongoing efforts by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) to align their accounting standards and practices.