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24 October, 15:49

The Miller Company earned $99,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $70,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.

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  1. 24 October, 15:57
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    Answer and Explanation:

    The Miller Company estimates 3% of bad debts. Bad debts are amount that the company makes provision of the amounts they believe will not be able to collect.

    Allowance for doubtful account will be $99,000 x 3% = $2970

    If the company is unable to collect $2970 from the total of $99,000 then we would deduct that amount from net credit sales (99,000 - 2970) = $96,030.

    Now, the company collects $70,000 therefore, (96,030 - 70,000) = $26,030
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