Final answer:
The Net Accounts Receivable for Legacy Company, after adjusting for the estimated uncollectible accounts using the aging of accounts receivable method, is $396,800.
Step-by-step explanation:
Legacy Company uses the aging of accounts receivable method to estimate the amount of uncollectible accounts. On December 31, the company performed an aging of accounts receivable and found the following information:
- Accounts Receivable: $420,000
- Unadjusted Credit Balance in Allowance for Doubtful Accounts: $16,000
- Estimated Uncollectible Accounts Receivable: $23,200
To report the Net Accounts Receivable on the balance sheet, the company needs to adjust the Allowance for Doubtful Accounts to reflect the new estimate of uncollectible accounts. The adjustment will be the difference between the unadjusted credit balance in the Allowance for Doubtful Accounts and the new estimate of uncollectible accounts.
Adjustment Amount = New Estimate - Unadjusted Credit Balance = $23,200 - $16,000 = $7,200
This adjustment increases the Allowance for Doubtful Accounts, so the entry would be a debit to Bad Debt Expense and credit to Allowance for Doubtful Accounts for $7,200.
After the adjustment, the Allowance for Doubtful Accounts will have a balance of $23,200. Therefore, the Net Accounts Receivable that will be reported on the balance sheet is the Accounts Receivable minus the adjusted Allowance for Doubtful Accounts.
Net Accounts Receivable = Accounts Receivable - Allowance for Doubtful Accounts = $420,000 - $23,200 = $396,800