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On January 1, Year 2, Grande Company had a $69,600 balance in the Accounts Receivable account and a $2,600 balance in the Allowance for Doubtful Accounts account. During Year 2, Grande provided $183,000 of service on account. The company collected $215,500 cash from accounts receivable. Uncollectible accounts are estimated to be 1% of sales on account. The amount of uncollectible accounts expense recognized on the Year 2 income statement is:_______

Respuesta :

The amount of uncollectible accounts expense recognized on the Year 2 income statement is  $1,830.

Explanation:

  • On January 1, Year 2, Grande Company had balance = $69,600 in the Accounts Receivable account
  • Grande provided services = $183,000
  • The Allowance for Doubtful Accounts account = $2,600
  • The company collected  cash from accounts receivable = $215,500
  • Uncollectible accounts are estimated to be =  1% of sales on account
  • Thus, following calculation gives the desired result,
  • Multiply amount of Grande services with 1% sales on account.
  • i.e : $183,000 sales on account × 1% = $1,830
  • So, the amount of uncollectible accounts expense is $1,830 as the income statement for the 2nd year.
  • The reserves are recorded when, the uncollectible accounts expense are debited and credit the allowance for the uncollectible accounts.
  • There are many reasons for the uncollectible accounts such as,
  • the debtor's bankruptcy,
  • the inability to get the debtor,
  • fraud, etc

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