Question

At the end of the current year, Accounts Receivable has a balance of $794,380; Allowance for Doubtful Accounts has a credit balance of $7,713; and sales for the year total $2,820,000. Bad debt expense is estimated at 1/2 of 1% of net sales.

a. Determine the amount of the adjusting entry for bad debt expense.
$

b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.

Adjusted Balance

Accounts Receivable$

Allowance for Doubtful Accounts

Bad Debt Expense

c. Determine the net realizable value of accounts receivable.
$

Answer 1

a.

Accounts receivable = $794,380

Allowance for doubtful accounts = $7,713

Sales = $2,820,000

Bad debt expense = 1/2 of 1% of sales

= 2,820,000 x 1% x 1/2

= $14,100

Journal

Account Title and Explanation	Debit	Credit
Bad debt expense	14,100
Allowance for doubtful accounts		14,100

b.

Adjusted balance of accounts receivable = $794,380

Adjusted balance of Allowance for doubtful accounts = Allowance for doubtful accounts, beginning + Bad debt expense

= 7,713 + 14,100

= $21,813

Adjusted balance of  Bad debt expense = $14,100

c.

Net realizable value of accounts receivable = Accounts receivable - Adjusted balance of Allowance for doubtful accounts

= 794,380 - 21,813

= $772,567

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