Question

Percent of Sales Method

At the end of the current year, Accounts Receivable has a balance of $595,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,680,000. Bad debt expense is estimated at 1/4 of 1% of sales.

1. Determine the amount of the adjusting entry for uncollectible accounts.
$

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

Accounts Receivable	$
Allowance for Doubtful Accounts	$
Bad Debt Expense	$

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

Answer 1

1)	Adjusting Entry
	Account titles & explanations					Debit	Credit
	Bad debts expense					6700
	Allowance for Doubtful accounts						6,700
	(2,680,000*1%*1/4)
2)	Account receivable					595,000
	Allowance for Doubtful accounts					12,200
	Bad Debts expense					6,700
3)	Net realizable value of accounts receivable
	Accounts receivable					595,000
	less allowance for doubtful accounts					-12,200
	net realizable value of accounts receivable					582,800