During 20x7, Luna Supply Company had net sales of $5,700,000. Most of the sales were on credit. At the end of 20x7, the balance of Accounts Receivable was $700,000, and Allowance for Uncollectible Accounts had a debit balance of $24,000. Luna Supply Company’s management uses two methods of estimating uncollectible accounts expense: the percentage of net sales method and the accounts receivable aging method. The percentage of uncollectible sales is 1.5 percent of net sales, and based on an aging of accounts receivable, the end-of-year uncollectible accounts total

$70,000.

Prepare the end-of-year adjusting entry to record the uncollectible accounts expense under each method. What will the balance of Allowance for Uncollectible Accounts be after each adjustment? Why are the results different? Which method is likely to be more reliable? Why?

Aging Method and Net Sales Method Contrasted