Grayhawk Company reported net credit sales of $588,000 for the year ending December 31, 2019. On January 1, 2019, the Allowance for Doubtful Accounts had a credit balance of $14,400. During 2019, $24,000 of uncollectible accounts receivable were written off. Grayhawk has experienced bad debt losses of 3% of credit sales in prior periods. Using the percentage of credit sales method, what is the adjusted balance in the Allowance for Doubtful Accounts at December 31, 2019?

A) $17, 640

B) $8,400

C) $27,600

D) $8,040

Question

Augustus Rocha

Business

14 May, 01:32

Grayhawk Company reported net credit sales of $588,000 for the year ending December 31, 2019. On January 1, 2019, the Allowance for Doubtful Accounts had a credit balance of $14,400. During 2019, $24,000 of uncollectible accounts receivable were written off. Grayhawk has experienced bad debt losses of 3% of credit sales in prior periods. Using the percentage of credit sales method, what is the adjusted balance in the Allowance for Doubtful Accounts at December 31, 2019?

A) $17, 640

B) $8,400

C) $27,600

D) $8,040

+4

Answers (1)

Know the Answer?

Ethan Paul · Answer 1

D) $8,040

Explanation:

Credit Sales Method:

Bad Debt Losses = 3% of Credit Sales

Bad Debt Losses = 0.03 x $588,000

Bad Debt Losses = $17,640

Adjusted balance in the Allowance for Doubtful Accounts:

Bad Debt Losses - (uncollectible accounts receivable - Allowance for Doubtful Accounts)

$17,640 - ($24,000 - $14,400)

$17,640 - $9,600

$8,040