Question

James Corporation started 2019 with a $22,000 balance in accounts receivable and an $800 balance in the allowance for doubtful accounts. The company had credit sales (sales on account) of $44,000, collections on accounts receivable of $47,000, and wrote off uncollectible accounts of $500 during 2019. The company uses the allowance method and estimates that 4% of its outstanding accounts receivable balance will be uncollectible.

20. The balance in the accounts receivable account at the end of 2019 would be

a.   $17,700.
b.   $18,500.
c.   $19,000.
d.   $19,300.

21. Assuming no other entries were recorded to uncollectible accounts expense during 2019, the amount of the adjustment to uncollectible accounts expense appearing on the 2019 income statement would be

a.   $   440.
b.   $   460.
c.   $   740.
d.   $   760.

22. The net realizable value of receivables at the end of the year would be

a.   $17,760.
b.   $18,060.
c.   $18,240.
d.   $18,540.

Answer 1

• Working required for answering #20, #21 and # 22

	Account receivables	Allowance for Doubtful account	Net Realizable value	Bad Debt Expense
Beginning balance	$22,000	$800	$21,200
Credit sales	$44,000
Cash collections	($47,000)
Written off	($500)	($500)
Ending balance (unadjusted)	$18,500	$300	$18,200
Bad Debt Expense [($18500 x 4%) - $ 300]		$440		$440
Ending balances [adjusted]	$18,500	$740	$17,760	$440

• Answer #20
  Correct Answer = Option ‘B’ $ 18500
• Answer #21
  Correct Answer = Option ‘A’ $ 440 [bad debt expense]
• Answer #22
  Correct Answer = Option ‘A’ $ 17,760