At the End of the Current Year, the Trial Balance

question 14

Short Answer

At the end of the current year, the trial balance of Daniels' Furniture Store included the accounts and balances shown below. Credit sales were $180,000. Returns and allowances on these sales were $2,000. Assume that the firm bases its estimate of the loss from uncollectible accounts on 0.4 percent of net credit sales. $$\begin{array} { l r } \text { Accounts Receivable } & \$ 36,000 \mathrm { Dr } . \\\text { Allowance for Doubtful Accounts } & 1,000 \mathrm { Dr } . \\\text { Sales } & 290,000 \mathrm { Cr } . \\\text { Sales Returns and Allowances } & 4,000 \mathrm { Dr } .\end{array}$$ 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?

---

Definitions:

Contribution Margin Ratio

The ratio of contribution margin to sales revenue, indicating the percentage of each sales dollar available to cover fixed costs and provide profit.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Fixed Manufacturing Overhead

is the sum of all the production costs that do not change with the level of output, including costs like factory rent, salaries of permanent employees, and depreciation of factory equipment.