For each of the following scenarios, indicate the amount of the adjusting journa

ID: 2401571 • Letter: F

Question

For each of the following scenarios, indicate the amount of the adjusting journal entry for Bad Debt expense to be recorded, the balance in Allowance for Doubtful Accounts after adjustment at December 31, and the net realizable value of Accounts Receivable at December 31.

a. Based on an analysis of Simmon's Company's $380,000 balance in Accounts Receivable at December 31, it was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts before adjustment.

b. Blake Company had credit sales of $900,000 at year-end, and has an Accounts Receivable balance of $425,000 at December 31, and an Allowance for Doubtful Accounts credit balance of $11,000 before adjustment. Blake estimates bad debt expense as 3/4 of 1% of credit sales.

c. Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance for Doubtful Accounts has a debit balance of $750.

Bad Debt Expense $ Allowance for Doubtful Accounts at Dec. 31 Net Realizable Value of A/R at Dec. 31

Explanation / Answer

a) Bad debt expense = Estimated uncollectible amount - Bal in Allowance for doubtful accounts

= $15,500 - $1,200 = $14,300

Allowance for Doubtful Accounts at Dec. 31 = $15,500 ($1,200+$14,300)

Net Realizable Value of A/R at Dec. 31 = Gross A/R - Allowance for Doubtful Accounts at Dec. 31

= $380,000 - $15,500 = $364,500

b) Bad debt expense = Credit sales*1%*3/4

= $900,000*1%*3/4 = $6,750

Allowance for Doubtful Accounts at Dec. 31 = Beg bal+Bad debt expense

= $11,000+$6,750 = $17,750

Net Realizable Value of A/R at Dec. 31 = Gross A/R - Allowance for Doubtful Accounts at Dec. 31

= $425,000 - $17,750 = $407,250

c) Bad debt expense = Estimated uncollectible amount+Debit bal in Allowance for doubtful acc

= $24,000+$750 = $24,750

Allowance for Doubtful Accounts at Dec. 31 = ($750)+$24,750 = $24,000

Net Realizable Value of A/R at Dec. 31 = $812,000 - $24,000 = $788,000

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For each of the following scenarios, indicate the amount of the adjusting journa

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