At the End of the Current Year, the Trial Balance

question 56

Short Answer

At the end of the current year, the trial balance of Kate's Cafe included the accounts and balances shown below. Credit sales were $90,000. Returns and allowances on these sales were $1,000. Assume that the firm bases its estimate of the loss from uncollectible accounts on 3 percent of accounts receivable. $$\begin{array} { l r } \text { Accounts Receivable } & \$ 18,000 \mathrm { Dr } . \\\text { Allowance for Doubtful Accounts } & 500 \mathrm { Dr } . \\\text { Sales } & 145,000 \mathrm { Cr } \text {. } \\\text { Sales Returns and Allowances } & 2,000 \mathrm { Dr } .\end{array}$$ 1. What is the balance in the Allowance for Doubtful Accounts account after the adjusting entry for the estimated loss from uncollectible accounts is posted?
2. What is the amount of the adjusting entry for the estimated loss from uncollectible accounts?

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Definitions:

Compression

The act of pressing together; in geology, it refers to the stress applied to materials causing a decrease in volume or shortening.

Thrust Faulting

A geological process where one rock layer is pushed up over another, often leading to mountain building.

Overriding Plate

The tectonic plate that sits above another plate at a convergent boundary, often responsible for mountain building and volcanic activity.

Ocean-Continent Convergent Boundary

A plate-tectonic boundary where an oceanic plate converges with a continental plate, generally expressed by subduction of the oceanic plate beneath the continent.