Question
Maverick Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, 2014 the balance
Maverick Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, 2014 the balance of accounts receivable is $220,000, and the allowance for uncollectible accounts has a credit balance of $3,000. Based on past experience, Maverick estimates that the percentage of accounts that will prove to be uncollectible within the three age groups is 2%, 8%, and 20%, respectively.
Accounts Recievable Aging Information
Current $170,000
60 days past due $41,000
Over 60 days past due $9,000
Total $220,000
Based on these facts, the adjusting entry for uncollectible accounts should be made in the amount of:
A) $5,480
b) $12,480
c) $11,480
d) $8,480
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