Marr Co. had the following sales and accounts receivable balances, prior to any adjustments at year-end

 Marr Co. had the following sales and accounts receivable balances, prior to any adjustments at year-end:



Credit sales    $10,000,000
Accounts receivable    3,000,000
Allowance for uncollectible accounts    50,000


Marr uses 3% of accounts receivable to determine its allowance for uncollectible accounts at year-end.  By what amount should Marr adjust its allowance for uncollectible accounts at year-end?
$0
$ 40,000
$ 90,000
$140,000

Answer

$ 40,000

 
 You Answered Correctly!
This answer is correct because the allowance for uncollectible amounts should be equal to $90,000, and it is currently $50,000. Therefore the required adjustment is $40,000 ($90,000-$50,000).