Question

57. Using percentage of sales method in estimating the uncollectible account expense, Key Company expects 2% of the 2015 credit sales to be uncollectible. The credit sales of 2015 amount to $110,000 and the allowance for uncollectible accounts prior to adjustment has a credit balance of $300. The amount of the uncollectible account expense is:

Select one:

a. $300

b. $1,900

c. $2,500

d. $2,200

58. At December 31, 2015, the accounts receivable balance of Carrie Corporation is $200,000. Carries expects 1% of the outstanding accounts receivable to be uncollectible. Prior to adjustment, allowance for uncollectible accounts has a credit balance of $200. The expense reported on the income statement as uncollectible account expense of 2015 is:

Select one:

a. $2,000

b. $1,800

c. $2,200

d. $200

Answer 1

57)

Uncollectible amount

= 2%*110,000

=$2,200

Credit balance of uncollectible accounts = $300

The credit balance will be reduced while recording the uncollectible amount in 2015 as the that amount is already been credited to the uncollectible accounts

Therefore the amount of uncollectible accounts expense will be

= 2,200 - 300

= $1,900

Therefore the correct option is B

58)

Uncollectible amount

= 1%*200,000

=$2,000

Credit balance of uncollectible accounts = $200

The credit balance will be reduced while recording the uncollectible amount in 2015 as the that amount is already been credited to the uncollectible accounts

Therefore the amount of uncollectible accounts expense will be

= 2,000 - 200

= $1,800

Therefore the correct option is B

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