Percent of sales and aging of accounts receivable allowance methods

(Learning Objective 4) 15–20 min.

Outerbanks, Inc., uses the allowance method to account for uncollectible accounts. On December 31, 2014, Allowance for Uncollectible Accounts has a $1,300 credit balance.

Journalize the year-end adjusting entry for uncollectible accounts assuming the following independent scenarios:

1. Outerbanks, Inc., estimates uncollectible accounts as 3/4 of 1% of net credit sales.

Net credit sales for the year equal $800,000.

2. Based on an aging of Accounts Receivable, Outerbanks, Inc. estimates that uncollectible accounts will equal $2,650.

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