PROBLEM #1 At the beginning of the year, Sonoran Park Equipment\'s accounts rece

Question

PROBLEM #1

At the beginning of the year, Sonoran Park Equipment's accounts receivable balance was $105,000 and the allowance for doubtful accounts had a $1,950 credit. Sonoran's sales in the current year were $787,500, 80% of which were on credit. Collections on account during the year were $502,000. Additionally, Sonoran wrote off $3,000 of uncollectible accounts during the year. It is estimated that 6% of the year end accounts receivable are expected to be uncollectible.

Using the allowance for bad debts based on accounts receivable aging method, determine the journal entry for the estimate of bad debts. What is Sonoran's net realizable value of accounts at the end of the year?

Journal Entry

    Show work here:

B. Net Realizable Value

Explanation / Answer

Gross Accounts Receivable at year end = 105000+(787500*80%)-502000-3000= 230000 Balance in allowance for doubtful accounts before adjustment = 1950-3000 = 1050 debit Journal Entry: Bad debts expense 14850 =(230000*6%)+1050         Allowance for doubtful accounts 14850 B. Net Realizable Value = 230000-(230000*6%)= 216200

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