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16 September, 17:58

Accounts receivable $1,050,000Allowance (90,000) Cash realizable value $960,000During 2007 sales on account were $290,000 and collections on account were $172,000. Also during 2007 the company wrote off $16,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $108,000.52. Bad debts expense for 2007 isa. $ 34,000b. $ 18,000c. $108,000d. $ 2,000

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  1. 16 September, 21:12
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    a. $ 34,000

    Explanation:

    The entry when the company wrote off uncollectible accounts:

    Debit Allowance for Doubtful Accounts $16,000

    Credit Uncollectible accounts $16,000

    At the end of 2007, Allowance for Doubtful Accounts before adjusting trial balance: $90,000-$16,000 = $74,000

    The company estimates bad debts based on outstanding receivable accounts. So, the amount of Bad debts expense for 2007 should be:

    $108,000 - $74,000 = $34,000

    The entry will be record:

    Debit Bad debts expense $34,000

    Credit Allowance for Doubtful Accounts $34,000
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