Uncollectible Accounts-Two Methods At the End of the Year the Unadjusted Trial Balance

question 106

Essay

Uncollectible accounts-two methods
At the end of the year the unadjusted trial balance of Angel Provisions included the following accounts:
(a. )If Angel uses the balance sheet approach to estimate uncollectible accounts expense,and aging the accounts receivable indicates the estimated uncollectible portion to be $6,075,what will the uncollectible accounts expense for the year be?
(b. )If the income statement approach to estimating uncollectible accounts expense is followed,and uncollectible accounts expense is estimated to be 1% of net credit sales,what is the amount of uncollectible accounts expense for the year?

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Definitions:

Credit Side

The right side of an accounting ledger where credits are recorded, typically increasing liabilities and equity or decreasing assets.

Expenses

The money spent or costs incurred in an entity's efforts to generate revenue, representing the cost of doing business.

Withdrawals

Funds taken out from a business by its owner(s) for personal use.

Credit

An accounting entry that either increases a liability or equity account, or decreases an asset or expense account.