A question from Becker-

For the year ended December 31, 1989, Beal Co. estimated its allowance for uncollectible accounts using the year-end aging of accounts receivable. The following data are available:

Allowance for uncollectible accounts, 1/1/89 $42,000

Provision for uncollectible accounts during 1989 (2% on credit sales of $2,000,000) 40,000

Uncollectible accounts written off, 11/30/89,  46,000

Estimated uncollectible accounts per aging, 12/31/89 , 52,000

After year-end adjustment, the uncollectible accounts expense for 1989 should be:

a. $46,000

b. $48,000

c. $52,000

d. $56,000

The correct answer is D. I am wondering do we have to consider the provision for uncollectible accounts during 1989 (2% on credit sales of $2,000,000) 40,000??

From the question, it says we will estimated its allowance using the year-end aging of A/R. THanks!!

No, you don't have to consider credit sales as the question tells you that they estimate their allowance "using the year-end aging of accounts receivable." The test writers only put the credit sales in there to CONFUSE YOU and make you doubt your ability. If the question tells you something, believe it - don't let excess facts cause you to make up rules.

You do have to consider the provision. Remember that the Allowance account is a Balance sheet account and it must get "trued-up" to what the balance should be. The provision is 40K and to get the balance to 52K we must true-up the balance 16K to get it to the 52K desired balance.

BB 42000 - W/O 46000 + 40000 Provision +16000 true up = 52K

Therefore: 40K + 16K = 56K total expense