At the end of the year Ward & Ward money cleaning company has $950,000 of Sales,
ID: 2446434 • Letter: A
Question
At the end of the year Ward & Ward money cleaning company has $950,000 of Sales, Sales Returns & Allowances of $35,000, Accounts Receivable of $290,000, and the Allowance for Doubtful Accounts has a DEBIT balance of $2,500. It estimates that 4% of net sales will become uncollectable next year.
A) What account will be DEBITED in the Adjusting entry?
B) What will be the AMOUNT of the Adjusting entry?
C) What will be the ending balance in the Allowance for Doubtful Accounts?
D) What will be the net cash realizable balance value AFTER the adjustment?
Explanation / Answer
At the end of the year Ward & Ward money cleaning company has $950,000 of Sales, Sales Returns & Allowances of $35,000, Accounts Receivable of $290,000, and the Allowance for Doubtful Accounts has a DEBIT balance of $2,500. It estimates that 4% of net sales will become uncollectable next year.
A) What account will be DEBITED in the Adjusting entry?
Bad Debt Expenses
B) What will be the AMOUNT of the Adjusting entry?
AMOUNT of the Adjusting entry = 39100
C) What will be the ending balance in the Allowance for Doubtful Accounts?
Ending balance in the Allowance for Doubtful Accounts = $ 36,600
D) What will be the net cash realizable balance value AFTER the adjustment?
Net cash realizable balance value AFTER the adjustment = Account Recievable - Allowance for doubtful account
Net cash realizable balance value AFTER the adjustment = 290000 - 36600
Net cash realizable balance value AFTER the adjustment = $ 253,400
Working
Net Sale = Sale - Sales Return & Allowances
Net Sale = 950000-35000
Net Sale = 915000
Accounts Receivable = 290000
Allowance for Doubtful Accounts before adjustment = -2500
Alllowance for Doubtful Account needed at the end = 915000*4%
Alllowance for Doubtful Account needed at the end = $ 36,600
Bad Debt Expenses = Alllowance for Doubtful Account needed at the end - Allowance for Doubtful Accounts before adjustment
Bad Debt Expenses = 36600 - (-2500)
Bad Debt Expenses = 39100
Journal Entry
Account Title & Explaination Debit Credit Bad Debt Expenses 39100 Allowance for Doubtful Accounts 39100Related Questions
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