At the end of the current year, Accounts Receivable has a balance of $2,500,000;

Question

At the end of the current year, Accounts Receivable has a balance of $2,500,000; Allowance for Doubtful Accounts has a debit balance of $9,000; and net sales for the year total $32,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $76,000.

Determine

(a) the amount of the adjusting entry for uncollectible accounts.

(b) the adjusted balances of accounts receivable, allowance for doubtful accounts, and bad debt expense

(c) the net realizable value of accounts receivable.

Explanation / Answer

a) amount of the adjusting entry for uncollectible account = allowance of bad debt - dubtful debt

= 9000 - 0.01*0.25*32,000 = 8920

b)

Accounts Receivable $2,500,000
Allowance for Doubtful Accounts $9000
Bad Debt Expense $80

c) net realized value = receivables- allowance

=2500,000 -9000 = 2491000

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