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

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.

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.

Explanation / Answer

Bad Debt Expense = 900000*0.75%= 6750 Allowance for Doubtful Accounts at Dec. 31 = 11000+6750 = 17750 Net Realizable Value of A/R at Dec. 31 = 425000-17750= 407250

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