[CPApracticer]

Ward estimates its uncollectible accounts expense to be 2% of credit sales. Ward’s credit sales during the current year were $1,000,000. During the year, Ward wrote off $18000 of uncollectible accounts. Ward’s allowance for uncollectible accounts had a $15,000 balance on January 1. In its December 31 income statement, what amount should Ward report as uncollectible accounts expense?

a. 17000

b. 23000

c. 18000

d. 20000

Answer:

Begin balance Jan 1: 15000

Add: Uncollectible accounts expense (provision): 20000

Subtotal: 35000

Less: Write offs (18000)

Ending Balance: 17000

Choice d is correct $20000 uncollectible accounts expense.

The only pertinent info is the:

Credit sales: 1000000

Uncollectible provision: 2%

Uncollectible expense: 20000

My question: I got my answer to equal $17000 after using the Base format. How come the answer is $20000 and not $17000. Can someone please explain this to me. Thank you.

F: 54 (4/13) 60 (4/14) 67 (9/14) 66 (10/14) 63 (11/15) 79 (2/16) PASSED
A: 60 (5/13) 80 (4/16) PASSED
R: 60 (7/13) 61 (2/15) 70 (4/15) 77 (7/15) PASSED
B: (6/16)

[mla1169]

The balance in the allowance for uncollectible accounts (balance sheet) will be 17k, but that's not what the question is asking. It's asking for the expense (income statement) which is 20k (1,000,000 x 2%)

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[acamp]

Only the amount charged to the uncollectible reserve is the expense.

Dr. Bad Debt Expense $20K

Cr. Bad Debt Allowance $20K

A write off only changes the balance sheet.

Dr. Bad Debt Allowance $18K

Cr. Accounts Receivable $18K

Ninja + Wiley Test Bank: [FAR - 81] [REG - 76] [BEC - 88] [AUD - 73](doh!)

Becker Videos: [AUD - 82]

California CPA

[Author]

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