Allowance Method for Uncollectible Accounts HEB Inc. had the following sales and accounts receivable balances, prior...
Allowance Method for Uncollectible Accounts
HEB Inc. had the following sales and accounts receivable balances, prior to adjustments at year-end. HEB Inc. uses the Percentage of Accounts Receivable at Year-end Method, to estimate its uncollectibles. HEB Inc. uses 4% of accounts receivable.
-What is the adjusting entry HEB Inc. should make at year-end?
(Please show you work)
DR. CR.
Credit Sales…………………………..…..… $20,000,000
Accounts Receivable………………$ 4,000,000
Allowance for Uncollectibles……….. $70,000
-What is the year-end net realizable value of its account receivables?
Homework Answers
| Accounts receivable | $ 4,000,000 |
| Estimated allowance for doubtful ($4,000,000*4%) | $ 160,000 |
Journal entry
| Baddebt expenses ($160,000-$70,000) | $ 90,000 | |
| Allowance for doubtful accounts | $ 90,000 |
| Accounts receivable | $ 4,000,000 |
| Less: Allowance for doubtful accounts | $ (160,000) |
| Net realizable value of accounts receivable | $ 3,840,000 |
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