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At the end of the current year, Accounts Receivable has a balance of $480,000; Allowance for...

At the end of the current year, Accounts Receivable has a balance of $480,000; Allowance for Doubtful Accounts has a credit balance of $4,500; and sales for the year total $2,160,000. Bad debt expense is estimated at 1/2 of 1% of sales. 1. Determine the amount of the adjusting entry for uncollectible accounts. 2. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. 3. Determine the net realizable value of accounts receivable.

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Answer #1

1) Adjusting entry

Date account and explanation debit credit
Bad debt expense (2160000*1%*1/2) 10800
Allowance for doubtful accounts 10800
(To record adjusting entry)

2) Adjusted balance

Account receivable 480000
Allowance for doubtful accounts (4500+10800) 15300
Bad debt expense 10800

3) Net realizable value = 480000-15300 = $464700

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