Question

On January 1, 2016, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $65,400 and $1,700, respectively. During the year Kincaid reported $162,000 of credit sales. Kincaid wrote off $1,350 of receivables as uncollectible in 2016. Cash collections of receivables amounted to $178,900. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

The amount of uncollectible accounts expense recognized in the 2016 income statement will be:_________
Kincaid's entry to recognize the write-off of the uncollectible accounts will__________
Kincaid's entry required to recognize the uncollectible accounts expense for 2016 will___________
The net realizable value of receivables appearing on Kincaid's 2016 balance sheet will amount to:_________

Answer 1

Answer:

1. Dr Allowance for bad debts     1350

          Cr Account receivable                  1350

     (Entry to write off un-collectible account in 2016)

2. Dr Bad debts expense   1620

       Cr Allowance for bad debts        1620

       9 Entry to record estimates of un-collectible)

Explanation:

a). Opening allowance for doubtful debts = 1700

Kincaid estimates 1% credit sales is collectibles = 162000 * 1% = 1620.

Total Allowance for doubtful debts =  1700+ 1620 = 3320

less: write off in 2016                                                   (1350)

         Allowance for doubtful debts at end                1970

Net realizable value:

Account receivable (end)=Account receivable (open)+ Sales during year -cash received against sales.

                      =65400+162000-178900

                     = 48500

Net realizable value = Account receivable (end)- Allowance for doubtful debt (end)

                         =  48500-1970

                       =  46530