Question

The account balances of Oriole Company at December 31, 2017, the end of the current year, show Accounts Receivable $147,600; Allowance for Doubtful Accounts $1,804 (credit); Sales $1,164,400; Sales Returns and Allowances $41,000; and Sales Discounts $16,400.

Record the adjusting entry at December 31, 2017, assuming bad debts are estimated to be (1) 10% of accounts receivable, and (2) 1.50% of net sales. No. Date Account Titles and Explanation Debit Credit (1) Dec. 31 (2) Dec. 31 Calculate the net realizable value of the accounts receivable for each approach to estimating uncollectible accounts (1) Net realizable value (2) Net realizable value Assume instead that the Allowance for Doubtful Accounts had a debit balance of $2,132 at December 31, 2017. What is bad debt expense for 2017, and what is the net realizable value of the accounts receivable at December 31, 2017, assuming bad debts are estimated to be (1) 10% of accounts receivable, and (2) 1.50% of net sales? (1)(2)Bad debts expense$ $ Net realizable value $ $

Answer 1

Net sales
Sales				1,164,400
Sales return and allowances				-41,000
Sales discounts				-16,400
Net sales				1,107,000
No	Date	Account titles and Explanations					Debit	Credit
1)	31-Dec	Bad debts expense					12956
		Allowance for Doubtful accounts						12956
		(147,600*10%)-1,804
2)	31-Dec	Bad debts expense					16605
		Allowance for Doubtful accounts						16605
		(1,107,000*1.5%)
	Net Realizable value
	1)	Accounts receivable			147,600
		Allowance for doubtful accounts			14760		(12956+1804)
		Net realizable value			132,840
	2)	Accounts receivable			147,600
		Allowance for doubtful accounts			18409		(16605+1804)
		Net realizable value			129,191
No	Date	Account titles and Explanations					Debit	Credit
1)	31-Dec	Bad debts expense					16892
		Allowance for Doubtful accounts						16892
		(147,600*10%)+2132
2)	31-Dec	Bad debts expense					16605
		Allowance for Doubtful accounts						16605
		(1,107,000*1.5%)
	Net Realizable value
	1)	Accounts receivable			147,600
		Allowance for doubtful accounts			14760		(16892-2132)
		Net realizable value			132,840
	2)	Accounts receivable			147,600
		Allowance for doubtful accounts			14473		(16605-2132)
		Net realizable value			133,127