Question

Percent of Sales Method

At the end of the current year, Accounts Receivable has a balance of $715,000; Allowance for Doubtful Accounts has a credit balance of $6,500; and sales for the year total $3,220,000. 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.
$

Answer 1

Answer:
(a)
Amount of the adjusting entry for uncollectible accounts             = Total Sales x Estimated Bad debts             =    $ 3,220,000 x 1% x 1/4             =    $ 8,050
Amount of the adjusting entry for uncollectible accounts =    $ 8,050
(b)
	Balance
Accounts Receivable	$ 715,000
Allowance for Doubtful Accounts ( $ 8,050 + $ 6,500 )	$ 14,550
Bad debts expense	$ 8,050
(c )
Particulars	Amount (in $ )
Accounts Receivable	$ 715,000
Less: Allowance for Doubtful Accounts	($ 14,550)
Net realizable value of accounts receivable	$ 700,450