Question

Maria had net sales (all on account) in 2020 of $800000. At December 31, 2020, before adjusting entries, the balances in selected accounts were: accounts receivable $1120000 debit, and allowance for doubtful accounts $2010 debit. Maria estimates that 4% of its accounts receivable will prove to be uncollectible. What is the net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020

Answer 1

$1,075,200

Step-by-step explanation:

Calculation to determine the net amount expected to be collected of the receivable reported on the financial statements at Dec. 31, 2020

First step is to calculate the Estimated uncollectible

Estimated uncollectible = 4% x $1,120,000

Estimated uncollectible= $44,800

Second step is to calculateThe bad debts expense in 2020

Bad debts expense= $44,800 + $2,010

Bad debts expense = $46,810

Preparation of The adjustment entry:

Debit Bad debts expense $46,810

Credit Allowance for doubtful accounts $46,810

Third step is to calculate the Balances in Allowance for doubtful accounts

Balances in Allowance for doubtful accounts=$46,810-$2010

Balances in Allowance for doubtful accounts=$44,800 credit

Now let calculateThe net amount expected to be collected of the receivables reported on the financial statements at December 31, 2020:

Using this formula

Net amount expected to be collected =Balances in Accounts receivable - Balances in Allowance for doubtful accounts

Let plug in the formula

Net amount expected to be collected = $1,120,000 - $44,800

Net amount expected to be collected = $1,075,200

Therefore the net amount expected to be collected of the receivable reported on the financial statements at Dec. 31, 2020 will be $1,075,200