Question

The following Information is avallable for Quality Book Sales sales on account and accounts recelvable: Accounts receivable balance, January 1, Year 2 Allowance for doubtful accounts, January 1, Year 2 Sales on account, Year 2 Collection on accounts receivable, Year 2 $ 78,800 4,778 553,808 559,8e0 After several collection attempts, Quality Book Sales wrote off $2720 of accounts that could not be collected. Quality Book Sales estimates that 5 percent of the ending accounts receivable balance will be uncollectible. Required a. Compute the following amounts: (1) Using the allowance method, the amount of uncollectible accounts expense for Year 2 (2) Net realizable value of recelvables at the end of Year 2. Amount of uncollectible accounts Net realizable value

Answer 1

1a) Uncollectible account expenses = 553000*5% = $27650

1b) Calculate balance :

Allowance for doubtful accounts = (4770+27650-2720) = $29700

Net realizable value = (78800+553000-559000-2720)-29700 = $40380

2) Journal entries

No	account and explanation	debit	credit
1	Account receivable	553000
	Sales revenue		553000
	(To record sales)
2	Cash	559000
	Account receivable		559000
	(To record collection)
3	Allowance for doubtful accounts	2720
	Account receivable		2720
	(To record write off)
4	Bad debt expense (553000*5%)	27650
	Allowance for doubtful accounts		27650
	(To record uncollectible account expense)