Question

Percent of Sales Method At the end of the current year, Accounts Receivable has a balance of $430,000; Allowance for Doubtful Accounts has a credit balance of $4,000; and sales for the year total $1,940,000. Bad debt expense is estimated at 1/4 of 1% of sales. 1. Determine the amount of the adjusting entry for uncollectible accounts. $ 2. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable $ 430,000 Allowance for Doubtful Accounts $ Bad Debt Expense $ 4,850 3. Determine the net realizable value of accounts receivable.

Answer 1

1. Determine the amount of the adjusting entry for uncollectible accounts. $850

Dr Bad debt expense 850

Cr Allowance for doubtful accounts 850

2. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.

• accounts receivable $430,000
• allowance for doubtful accounts $4,850
• bad debt expense $4,850

3. Determine the net realizable value of accounts receivable.

• $430,000 - $4,850 = $425,150

Step-by-step explanation:

accounts receivable balance $430,000

allowance for doubtful accounts balance $4,000

total sales for the year $1,940,000

total bad debt expense = 0.25% x $1,940,000 = $4,850

adjusting entry = $4,850 - $4,000 = $850