Question

2) At the end of the current year, Accounts Receivable has a balance of $800,000, Allowance for Doubtful Accounts has a $7,500 credit balance and Sales for the year are $3,500,000. Bad Debts Expense is estimated at 1/2 of 1% of Sales. Determine the arount of the adjusting entry for uncollectible accounts:$___. Determine the net realizable value of accounts receivable after the above adjusting entry is made: $_-------- Using the same information as above except that Bad Debts are estimated using the Analysis or Aging method to be $30,000. Determine the arount of the adjusting entry for uncollectible accounts: --------------

Answer 1

Answers

• Part 1

Amount of adjusting entry = ($ 3,500,000 Sales x 1%) x ½ = $ 17,500

Net Realizable Value = [$ 800000 Accounts receivables - $ 25000 Allowance account]
= $ 775,000

• Part 2

Amount of adjusting entry = $ 30000 credit balance required - $ 7500 unadjusted credit balance existing
= $ 22,500