Question

Joey's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During 2018, its first year of operations, Joey's Bike Shop experienced the following: Sales on account Cash sales Collections of accounts receivable Uncollectible accounts charged off during the year $271,180 642,000 257,545 1,019 Required Assume that Joey's Bike Shop uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of its sales on account will not be collected. Answer the following questions: a. What is the Accounts Receivable balance at December 31, 2018? b. What is the ending balance of Allowance for Doubtful Accounts at December 31, 2018, after all entries and adjusting entries are posted? c. What is the amount of uncollectible accounts expense for 2018? d. What is the net realizable value of accounts receivable at December 31, 2018? a Accounts receivable b. Allowance for doubtful accounts c. Uncollectible accounts expense d. Net realizable value Next >

Answer 1

Solution:

a	Accounts receivables	$          12,545
b	Allowance for Doubtful Accounts	$            1,701
c	Uncollectible account expense	$            2,711
d	Net realizable Value ( $ 12,545 - $ 1,701 )	$          10,844

Working:

1)

Accounts Receivables
Sales on Account	$        271,100	Cash Received / Collections	$          257,545
End balance	$          12,545	Write Off	$              1,010
Allowance for Doubtful Accounts
Write Off	$            1,010	Beg. Balance	$                     -
		Uncollectible account expense ($271,100*1%)	$              2,711
		End balance	$              1,701

2) Net realizable Value = Accounts receivables - Allowance for Doubtful Accounts = $ 12,545 - $ 1,701 =$ 10,844

3) Uncollectible account expense = $271,100*1% = $ 2,711