Question

Citywide Real Estate reported the following information for 2017: (Click the icon to view the information.) 1. If uncollectible accounts are determined by the percent-of-sales method to be 2 percent of net credit sales, what is the bad debt expense for 2017? 2. If uncollectible accounts are determined by the aging of receivables to be $4,000, what is the amount of net accounts receivable after adjusting entries for 2017? 1. If uncollectible accounts are determined by the percent-of-sales method to be 2 percent of net credit sales, what is the bad debt expense for 2017? Bad debt expense for 2017 is 2. If uncollectible accounts are determined by the aging of receivables to be $4,000, what is the amount of net accounts receivable after adjusting entries for 2017? After adjusting entries, net accounts receivable for 2017 is i Data Table - X Accounts receivable, Jan 1, 2017 Allowance for doubtful accounts, Dec 31, 2017, prior to adjustment Net credit sales during 2017 Collections on account during 2017 Cash sales during 2017 $ 28,000 1,600 220,000 94,000 35,000 Print Done Enter any number in the edit fields and then continue to the next question.

Answer 1

1) Under percent-of-sales method, bad debt expense shall be recorded based on % of net credit sales made during the year. At the same time, balance available in allowance account will not have any impact on recognizing bad debt expense for the year under this method. However, after recoding estimated bad debt expense based on % of sales, the bal. available in allowance account before this adjustment will obviously increase to the extent of bad debt expense thus recorded. So, balance in Allowance for Uncollectible Accounts shall not be considered under this method to recognized bad debt exp. for the year. Net credit sales during the year Bad debt % on credit sales Amount bad debt for the year $220,000 2% $4,400 ($220000 x 2%] 2) When bad debt expense is recognized based aging schedule, balance available in allowance for doubtful accounts shall be considered for recording bad debt expense related adjusting entry. That is, if allowance for doubtful debt accounts has credit balance, estimated bad debt expense shall be reduced by such credit balance and bad debt exp. shall be recorded for the amount equals to estimated bad debt expense minus credit balance in allowance account. As a result, net accounts receivable after making adjusting entry for estimated bad debt expense will be equal to gross accounts receivable less adjusted balance in allowance for doubtful accounts. Accounts receivable, Jan. 1, 2017 $28,000 Add: Net credit sales during the year $220,000 Less: Collections during the year $94,000 Gross accounts receivable $154,000 Less: Adjusted bal. in allowance for doubtful account $4,000 (Estimated bad debt expense] After adjusting entries, net accounts receivable for 2017 is $150,000