The miller company recognized $99,000 of service revenue earned on account during year 2. there was no beginning balance in the accounts receivable and allowance accounts. during year 2, miller collected $70,000 of cash from accounts receivable. the company estimates that it will be unable to collect 3% of its sales on account. the amount of uncollectible accounts expense recognized on the year 2 income statement was: multiple choice $2,100. $870. $2,970. $29,000.

Question

The miller company recognized $99,000 of service revenue earned on account during year 2. there was no beginning balance in the accounts receivable and allowance accounts. during year 2, miller collected $70,000 of cash from accounts receivable. the company estimates that it will be unable to collect 3% of its sales on account. the amount of uncollectible accounts expense recognized on the year 2 income statement was: multiple choice $2,100. $870. $2,970. $29,000.

Answer 1

To determine the uncollectible accounts expense, we need to find the amount of accounts receivable that the company estimates it will be unable to collect.

The Miller Company recognized $99,000 of service revenue earned on account during year 2.

During year 2, Miller collected $70,000 of cash from accounts receivable.

Therefore, the ending balance in the accounts receivable account is $99,000 - $70,000 = $29,000.

The company estimates that it will be unable to collect 3% of its sales on account.

Therefore, the estimated uncollectible accounts expense is 3% * $99,000 = $2,970.

So, the amount of uncollectible accounts expense recognized on the year 2 income statement is $2,970.

Therefore, the correct answer is $2,970.

Answer 2

To determine the amount of uncollectible accounts expense recognized on the Year 2 income statement, we can follow these steps:

Step 1: Calculate the total sales on account for Year 2:
Sales on Account = Service Revenue earned on account = $99,000

Step 2: Calculate the estimated uncollectible amount based on the company's estimate of 3%:
Uncollectible Amount = Sales on Account * Estimated Uncollectible Percentage
Uncollectible Amount = $99,000 * 3% = $2,970

Step 3: Calculate the bad debt expense recognized on the Year 2 income statement:
Bad Debt Expense = Uncollectible Amount - Cash Collected from Accounts Receivable
Bad Debt Expense = $2,970 - $70,000
Note: We deduct the amount of cash collected from accounts receivable as it represents the amount that was successfully collected, not the uncollectible amount.

Therefore, the amount of uncollectible accounts expense recognized on the Year 2 income statement is $2,970.