Determine the amount to be added to Allowance for Doubtful Accounts in each of the following cases: (a) Balance of $3,000 in the allowance account just prior to adjustment. Analysis of accounts receivable indicates doubtful accounts of $25,000.

(b) Balance of $500 in the allowance account just prior to adjustment. Uncollectibles are estimated at 2% of sales, which totaled $800,000 for the year.

a. $22,000

b. $16,000

Explanation:

The amount to be added to Allowance for Doubtful Accounts in each of the following cases are:

a. Balance of $3,000 in the allowance account just prior to adjustment. Analysis of accounts receivable indicates doubtful accounts of $25,000.

The amount to be added to the allowance for doubtful accounts will be doubtful accounts of $25,000 minus the balance of $3,000 in the allowance account just prior to adjustment. This will be:

= $25,000 - $3000

= $22000

b. Balance of $500 in the allowance account just prior to adjustment. Uncollectibles are estimated at 2% of sales, which totaled $800,000 for the year.

The amount to be added to the allowance for doubtful accounts will be:

= 2% of $800,000

= 2/100 × $800,000

= 0.02 × $800,000

= $16,000

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