Question

Scorpion Company has net credit sales of $5,400,000 for the year and it estimates that doubtful accounts will be 2% of sales. If its Allowance for Doubtful Accounts has a credit balance of $18,000 prior to adjustment, its balance after adjustment will be a credit of:

Answer 1

Answer:

Balance after adjustment will be a credit of $90,000

Explanation:

Particulars                               Amount

Non-collectible accounts       $108,000

Credit balance                        $18,000

Balance Adjustment              $90,000

Balance after adjustment will be a credit of $90,000

Note: Non-collectible accounts = 2% * $5,400,000 =$108000