Question: At the beginning of Year 3 Omega Company had a $52,000 balance in its accounts receivable account and a $1,400 balance in allowance for doubtful accounts. During Year 3 Omega experienced the following events.
(1) Omega earned $220,000 of revenue on account.
(2) Collected $230,000 cash from accounts receivable.
(3) Wrote-off $1,000 of accounts receivable as uncollectible.
Omega estimates uncollectible accounts to be 4% of receivables. The December 31, Year 3 ending balance in the allowance for doubtful accounts (balance after expense recognition) is
$1,240.
$2,040.
$1,000.
$1,640.