At the end of the current year, Accounts Receivable has a balance of $450,000; Allowance for Doubtful Accounts has a credit balance of $4,000; and sales for the year total $2,030,000. 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 a.
Expected Uncollectible Amount = Sales * Estimated Bad Debt
Expected Uncollectible Amount = $2,030,000 * 1/4 * 1%
Expected Uncollectible Amount = $5,075
Answer b.
Accounts Receivable = $450,000
Allowance for Doubtful Accounts = $4,000 + $5,075
Allowance for Doubtful Accounts = $9,075
Bad Debt Expense = $5,075
Answer c.
Net Realizable Value = Accounts Receivable - Bad Debt
Expense
Net Realizable Value = $450,000 - $5,075
Net Realizable Value = $444,925
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