At the end of the current year, Accounts Receivable has a balance of $98,880; Allowance for Doubtful Accounts has a debit balance of $3,556; and sales for the year total $1,108,000. Bad debt expense is estimated at 1/2 of 1% of 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.
$
a.
Accounts receivable = $98,880
Allowance for doubtful accounts = $3,556 ( debit)
Sales = $1,108,000
Bad debt expense = 1/2 of 1% of sales
= 1,108,000 x 1% x 1/2
= $5,540
Journal
Account Title and Explanation |
Debit |
Credit |
Bad debt expense | 5,540 | |
Allowance for doubtful accounts | 5,540 |
b.
Adjusted balance of accounts receivable = $98,880
Adjusted balance of Allowance for doubtful accounts = Bad debt expense - Allowance for doubtful accounts, beginning
= 5,540 - 3,556
= $1,984
Adjusted balance of Bad debt expense = $5,540
c.
Net realizable value of accounts receivable = Accounts receivable - Adjusted balance of Allowance for doubtful accounts
= 98,880 - 1,984
= $96,816
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