Question

At the end of the current year, Accounts Receivable has a balance of $675,000; Allowance for Doubtful Accounts has a debit balance of $5,400; and sales for the year total $3,000,000. An analysis of receivables indicates the uncollectible receivables are estimated to be $45,000

Required:
a. Determine the amount of the adjusting entry for bad debt expense.
b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.
c. Determine the net realizable value of accounts receivable.

Answer 1

Answer and Explanation:

The computation is shown below:

a.

The amount of the adjusting entry for bad debt expense should be

= $45,000 + $5,400

= $50,400

The journal entry should be

Bad Debt Expense Dr. 50,400

To Allowance for Doubtful Accounts Cr. 50,400

(Being the bad debt expense is recorded)

b.

Accounts Receivable 675,000

Allowance for Doubtful Accounts 45,000

Bad Debt Expense 50,400

c.

Accounts Receivable 675,000

Less: Allowance for Doubtful Accounts (45,000)

Net realizable value of accounts receivable 630,000