Question

At the end of the current year, Accounts Receivable has a balance of $841,760 Allowance for Doubtful Accounts has a credit balance of $7,849 and sales for the year total $2,782,000. Bad debt expense is estimated at ½ 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.
$

Answer 1

a.

Sales = $2,782,000

Bad debts expense = 1/2 of 1% of sales

= 2,782,000 x 1% x 1/2

= $13,910

Amount of adjusting entry for bad debts expense = $13,910

b.

Accounts receivable = $841,760

Allowance for doubtful accounts, adjusted = Allowance for doubtful accounts, existing + Bad debt expense

= 7,849+13,910

= $21,759

Bad debt expense = $13,910

	Adjusted Balance
Accounts Receivable	$841,760	Debit
Allowance for Doubtful Accounts	$21,759	Credit
Bad Debt Expense	$13,910	Debit

c.

Net realizable value of accounts receivable = Accounts receivable - Allowance for doubtful accounts, adjusted

= 841,760-21,759

= $820,001