At the end of the year, Mercy Cosmetics’ balance of Allowance for Uncollectible Accounts is $450 (credit) before adjustment. The balance of Accounts Receivable is $17,500. The company estimates that 15% of accounts will not be collected over the next year. What adjustment would Mercy Cosmetics record for Allowance for Uncollectible Accounts?

Mercy Cosmetics

Adjustment to record for Allowance for Uncollectible Accounts is:

$2,175

Explanation:

The Allowance for Uncollectible Accounts = $450 credit before adjustment .

After adjustment the Allowance for Uncollectible Accounts will equal $2,625 (15% of $17,500).

So the adjustment for the period is to debit the Uncollectible Expense account with $2,175 and then credit the Allowance for Uncollectible Accounts with $2,175.  This adjustment brings the Allowance for Uncollectible Accounts to $2,625 as stated earlier.

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