At the end of 2015, Murray State Lenders had a balance in its accounts receivables of $100,000 and Allowance for Uncollectible Accounts of $4,500 (credit) before any adjustment. The company estimated that 12% of accounts receivables is uncollectible. Murray State's adjustment on December 31, 2015, to record its estimated uncollectible accounts included a:

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27-06-2022
Business

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At the end of 2015, Murray State Lenders had a balance in its accounts receivables of $100,000 and Allowance for Uncollectible Accounts of $4,500 (credit) before any adjustment. The company estimated that 12% of accounts receivables is uncollectible. Murray State's adjustment on December 31, 2015, to record its estimated uncollectible accounts included a:

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anthougo anthougo · Answer 1 · 2022-06-29T15:16:18+02:00

Murray State's adjustment on December 31, 2015, to record its estimated uncollectible accounts included a Debit to Bad Debt Expense of $7,500; credit to Allowance for Uncollectible Accounts of $7,500.

What is the adjustment for uncollectible accounts?

The adjustment for uncollectible accounts involves crediting the Allowance for Uncollectible Accounts and debiting the Bad Debts expense.

The credit to the Allowance for Uncollectible Accounts brings the account to its rightful balance at the end of the period.

Data and Calculations:

Accounts receivable balance = $100,000

Allowance for Uncollectible Accounts = $4,500 (credit)

Estimated uncollectible accounts = 12% or $12,000 ($100,000 x 12%)

Adjustment Analysis:

Bad Debts Expense $7,500 Allowance for Uncollectible Accounts $7,500 ($12,000 - $4,500).

Thus, Murray State's adjustment on December 31, 2015, to record its estimated uncollectible accounts included a Debit to Bad Debt Expense of $7,500; credit to Allowance for Uncollectible Accounts of $7,500.

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