Sunland Company has outstanding accounts receivable totaling $1.28 million as of December 31 and sales on credit during the year of $6.36 million. There is also a debit balance of $6300 in the allowance for doubtful accounts. If the company estimates that 3% of its accounts receivable will be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense?

Answer:

$38,400

Explanation:

Calculation to determine what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense

Using this formula

Balance in the Allowance account adjustment = outstanding accounts receivable *Estimated uncollectible percentage

Let plug in the formula

Balance in the Allowance account adjustment= $1.28 million account receivables x 3%

Balance in the Allowance account adjustment= $38,400

Therefore what will be the balance in the allowance for doubtful accounts after the year-end adjustment to record bad debt expense is $38,400

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