Question - StorageTek Corporation gathered the following information from its accounting records for the year ended December, 31, 2016, prior to adjustment:
- Net credit sales for the year = $1,150,000
- Accounts Receivable (Dec 31, 2016) = $93,000
- Allowance for Uncollectible Accounts, prior to adjustment (Dec 31, 2016) = $6,000 debit balance
- StorageTek Corporation uses the allowance method of accounting for bad debts and estimates bad debts at 2.5% of net credit sales.
Required:
1. Prepare the adjusting entry on December 31, 2016.
2. Determine the balance in the Allowance for Uncollectible Accounts account after the adjusting entry is recorded.
3. Show how the receivables would be reported on the December 31, 2016, Balance Sheet for Storage Tek Corporation.