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25 April, 10:46

Sarah had net sales (all on account) in 2020 of $800000. At December 31, 2020, before adjusting entries, the balances in selected accounts were: accounts receivable $1120000 debit, and allowance for doubtful accounts $2260 debit. Sarah estimates that 3% of its accounts receivable will prove to be uncollectible. What is the net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020?

a.) $1084140

b.) $35860

c.) $1088660

d.) $1086400

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  1. 25 April, 12:55
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    d.) $1086400

    Explanation:

    Estimated uncollectible = 3% x $1,120,000 = $33,600

    At December 31, 2020, before adjusting entries, the balance allowance for doubtful accounts was $2,260 debit. The bad debts expense in 2020 was:

    $33,600 + $2,260 = $35,860

    The adjustment entry:

    Debit Bad debts expense: $35,860

    Credit Allowance for doubtful accounts: $35,860

    After adjusting entry, Balances in Allowance for doubtful accounts: $35,860-$2260=$33,600 credit

    The net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020:

    Balances in Accounts receivable - Balances in Allowance for doubtful accounts = $1,120,000 - $33,600 = $1,086,400
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