The following information is available for Quality Book Sales\'s sales on accoun
ID: 2568592 • Letter: T
Question
The following information is available for Quality Book Sales's sales on account and accounts receivable: Accounts Receivable Balance, January 1, 2018 Allowance for Doubtful Accounts, January 1, 2018 Sales on Account, 2018 Collections of Accounts Receivable, 2018 $124,430 3,920 831,690 860,508 After several collection attempts, Quality Book Sales wrote off $3,060 of accounts that could not be collected. Quality Book Sales estimates that 1.75 percent of sales on account will be uncollectible. Required a. Compute the following amounts: (1) Using the allowance method, the amount of uncollectible accounts expense for 2018. (Round your final answer to nearest whole dollar amount.) (2) Net realizable value of receivables at the end of 2018. (Round intermediate calculations final answer to nearest whole dollar amount.) 1. Uncollectible accounts expense 2. Net realizable value b. Why the uncollectible accounts expense amount is different from the amount that was written off as uncollectible. Uncollectible accounts expense is the actual amount that was determined in the current accounting period to be uncollectible. Uncollectible accounts expense is an estimate of current receivables that may eventually be uncollectible.Explanation / Answer
a.
(1) Uncollectible accounts expense = (Sales on account x 1.75%)
= $831690 x 1.75%
= $14555
(2) Net realizable value = Beginning balance + Sales on account - Collections - Account written off - Allowance for doubtful accounts
= $124430 + 831690 - 860508 - 3060 - (3920 - 3060 + 14555)
= $77137
b. Uncollectible account expense is an estimate of current receivables that may eventually be uncollectible.
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