Question

Analysis of Receivables Method At the end of the current year, Accounts Receivable has a balance of $495,000; Allowance for Doubtful Accounts has a debit balance of $4,500; and sales for the year total $2,230,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $19,800. a. Determine the amount of the adjusting entry for uncollectible accounts. b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense c. Determine the net realizable value of accounts receivable.

Answer 1

a)

Bad debt expense = Estimated allowance for doubtful accounts + Existing debit balance in allowance for doubtful accounts

= 19,800 + 4,500

= $24,300

Amount of adjusting entry for uncollectible accounts = $24,300

b)

Accounts receivable	495,000
Allowance for doubtful accounts	19,800
Bad debt expense	24,300

c)

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

= 495,000 - 19,800

= $475,200

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