Joey\'s Bike Shop sells new and used bicycle parts. Although a majority of its s

Question

Joey's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During 2016, its first year of operations, Joey's Bike Shop experiencerd the following Sales on account Cash sales Collections of accounts receivable Uncollectible accounts charged off during the year $260,000 580,000 235,000 1,250 Required a. Assume that Joey's Bike Shop uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of its sales on account will not be collected. Answer the following questions (1) What is the Accounts Receivable balance at December 31, 2016? (2) What is the ending balance of the Allowance for Doubtful Accounts at December 31, 2016, after all entries and adjusting entries are posted? (3) What is the amount of uncollectible accounts expense for 2016? (4) What is the net realizable value of accounts receivable at December 31, 2016? (1) Accounts receivable (2) Allowance for doubtful accounts (3) Uncollectible accounts expense (4) Net realizable value b. Assume that Joey's Bike Shop uses the direct write-off method of accounting for uncollectible accounts Answer the following questions (1) What is the Accounts Receivable balance at December 31, 2016? (2) What is the amount of uncollectible accounts expense for 2016? (3) What is the net realizable value of accounts receivable at December 31, 2016? (1) Accounts receivable (2) |Uncollectible accounts expense (3) Net realizable value

Explanation / Answer

Solution 1a:

1. Accounts receivable balance at December 31, 2016 = Credit sales - Collections - Write off

= $260,000 - $235,000 - $1,250 = $23,750

2. Total estimated uncollectibles = $260,000*1% = $2,600

Uncollectible accounts charged off = $1,250

Ending balance of allowance for doubtful accounts on December 31, 2016 = $2,600 - $1,250 = $1,350

3. Amount of uncollectible account expense for 2016 = $2,600

4. Net realizable value of accounts receivables at Dec 31, 2016 = $23,750 - $1,350 = $22,400

Solution 1b:

1. Accounts receivable balance at the end of december 31, 2016 =

Credit sales - Collections - Write off

= $260,000 - $235,000 - $1,250 = $23,750

2. Amount of uncollectible account expense for 2016 = $1,250

3. Net realizable value of accounts receivables at Dec 31, 2016 = $23,750

Note: As multiple questions are posted, i have answered first question as per chegg policy, kindly post separate question for answer of remaining.

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