Gu Company provided the following from the unadjusted trial balance at year end Debit Credit Accounts Receivable 5,000,000 Allowance for Doubtful Accounts 40,000 Net Credit Sales 20,000,000 The entity estimated that 3% of the gross accounts receivable will become uncollectible What is the required allowance for doubtful accounts at year end? a. 150,000 b. 110,000 c. 190,000 d. 40,000
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Gu Company provided the following from the unadjusted
|
Debit |
Credit |
|
|
|
5,000,000 |
|
|
Allowance for Doubtful Accounts |
40,000 |
|
|
Net Credit Sales |
20,000,000 |
The entity estimated that 3% of the gross accounts receivable will become uncollectible
What is the required allowance for doubtful accounts at year end?
a. 150,000
b. 110,000
c. 190,000
d. 40,000
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