Question

At the end of the current year, Accounts Receivable has a balance of $795,000; Allowance for Doubtful Accounts has a debit balance of $7,000; and sales for the year total $3,580,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $29,400.

Required:
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.
c. Determine the net realizable value of accounts receivable.

Answer 1

Answer:

a. Required Adjustment $ 36400

b.Net Accounts Receivable  $ 758600

Allowance for Doubtful Accounts $   29400

Bad Debt Expense =  $ 36400

c. Net Accounts Receivable  $ 758600

Explanation:

Accounts Receivable  $795,000;

Allowance for Doubtful Accounts  $7,000 Dr

Sales for the year                       $3,580,000

Aging Method Allowance for Doubtful Accounts  $29,400.

Allowance for Doubtful Accounts  $7,000 Dr

a. Required Adjustment $ 36400

The entry would be

Bad Debt Expense   $ 36400 Dr

Allowance for Doubtful Accounts  $ 36400 Cr

As the balance in the Allowance for Doubtful Accounts   was a debit balance so it is added to the new Allowance for Doubtful Accounts   balance.

b. Accounts Receivable  $795,000;

Less Allowance for Doubtful Accounts  $ 36400 Cr

Net Accounts Receivable  $ 758600

Accounts Receivable amount is determined after deducting Allowance for Doubtful Accounts  from it.

Allowance for Doubtful Accounts

Beginning Balance $   $7,000 Dr

Expense Adjustments    $ 36400

Ending Balance         $29400

Bad Debt Expense =  $ 36400

As there are no write off the ending balance remains the same.

c. Accounts Receivable  $795,000;

Less Allowance for Doubtful Accounts  $ 36400 Cr

Net Accounts Receivable  $ 758600

Net Accounts Receivable amount is determined after deducting Allowance for Doubtful Accounts  from it.