Question

At the end of the current year, Accounts Receivable has a balance of $955,110; Allowance for Doubtful Accounts has a credit balance of $7,806; and sales for the year total $3,886,000. 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)

Net sales	$ 3,886,000
Estimated % of net credit sales	0.50%
Baddebt expenses for the period ($3,886,000*0.50%)	$        19,430

b)

Accounts receivable	$ 955,110
Allowance for doubtful account ($7,806+$19,430)	$    27,236
Baddebts expenses	$    19,430

c)

Accounts receivable	$ 955,110
Less: Allowance for doubtful account ($7,806+$19,430)	$ (27,236)
Net realizable value of accounts receivable	$ 927,874