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30 September, 08:11

At the end of the current year, Accounts Receivable has a balance of $590,000; Allowance for Doubtful Accounts has a debit balance of $5,500; and sales for the year total $2,660,000. Bad debt expense is estimated at 1/4 of 1% of sales. a. Determine the amount of the adjusting entry for uncollectible accounts. $ b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable $ Allowance for Doubtful Accounts $ Bad Debt Expense $ c. Determine the net realizable value of accounts receivable.

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  1. 30 September, 09:24
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    Answer and Explanation:

    a. The computation of uncollectible accounts and Journal entry is shown below:-

    Bad Debt expenses Dr, $6,650

    ($2,660,000 * 1 : 4 * 1%)

    To Allowance for doubtful accounts $6,650

    (Being uncollectible accounts is recorded)

    b. The computation of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense is shown below:-

    Accounts receivable = $590,000

    Allowance for Doubtful Accounts = (Sales of the year * 1 : 4 * 1%) - Credit balance

    = ($2,660,000 * 1 : 4 * 1%) - $5,500

    = $6,650 - $5,500

    = $1,150

    Bad debt expenses = Sales of the year * 1 : 4 * 1%

    = $2,660,000 * 1 : 4 * 1%

    = $6,650

    c. The computation of net realizable value of accounts receivable is shown below:-

    Net realizable value = Accounts receivable - Allowance for Doubtful Accounts

    = $590,000 - $1,150

    = $588,850
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