Question

At the end of the current year, Accounts Receivable has a balance of $795,000; Allowance for Doubtful Accounts has a credit balance of $7,000; and sales for the year total $3,580,000. Bad debt expense is estimated at 1/2 of 1% of sales.

a. Determine the amount of the adjusting entry for uncollectible accounts.
$

b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.

	Adjusted Balance Debit (Credit)
Accounts Receivable	$
Allowance for Doubtful Accounts	$
Bad Debt Expense	$

c. Determine the net realizable value of accounts receivable.
$

Answer 1

Answers

• [a]
  Amount of the adjusting entry = ½ of 1% of sales
  = ½ of 1% of $ 3580000
  = ½ of $ 35800
  = $ 17,900
• [b]

	Adjusted Balance Debit (Credit)
Accounts Receivable	$ 795,000
Allowance for Doubtful Accounts ($7000 + 17900)	$ 24,900
Bad Debt Expense	$ 17,900

• [c]
  Net realizable value = $ 795000 – 24900
  = $ 770,100