Question

Information related to accounts receivable is given:


Mobile Technology Ltd. reported an unadjusted balance of accounts receivable of $1,250,000 at 31 December 20X3, along with a credit balance in the allowance for doubtful accounts of $84,400 and an allowance for sales discounts of $7,300. At year-end, the company determined that an allowance of $18,000 for sales discounts was needed. It also decided that $56,000 of accounts receivable were uncollectible and should be written off. Of the remaining receivables, it was determined that 50% were current, and of the remaining net current balance, an allowance for doubtful accounts of 2% of the net balance was needed. The remaining 50% of outstanding accounts receivable were past due and an allowance for doubtful accounts of 10% of the outstanding balance was needed.

Accounts receivable-?

Less: Allowance for doubtful accounts-?

Less: Allowance for sales discount-?

Net accounts receivable-?

Bad debt expense-?

Answer 1

Accounts receivable	$1,194,000
Less allowance for doubtful debt	($71,640)
Less allowance for Sales discount	($28,400)
Net accounts receivable	$1,093,960
Baddebt expense	$43,240

Working notes

Accounts receviable will be written off through allowance for doubtful debts, thus decreasing accounts receivable and allowance for doubtful debts.

Remaining accounts receivable=$1,250,000-$56,000=$1,194,000

50% amount current net balacne=1,194,000*50%=$597,000

50% amount past due=597,000

Allowance for doubtful debt on net current balance=$597,000*2%

=$11,940

Allowance for doubtful debt on amount past due=597,000*10%

=$59,700

Amount already in allowance for doubtful debt=$84,400-$56,000

=$28,400

Total amount in allowance for doubtful debt should be=$11,940+$59,700

=$71,640

Baddebt expense recorded=71,640-28,400

Baddebt expense recorded=$43,240

Hope it helps!!