Percent of Sales Method At the end of the current year, Accounts Receivable has

Q: Percent of Sales Method At the end of the current year, Accounts Receivable has

SOLUTION 1. Amount for uncollectible accounts = Net sales * 0.0025 = $3,690,000 * 0.0025 = $9,225 2. Accounts Receivable = $820,000 Allowance for Doubtful Accounts = $9,225 + $7,500 = $16,725 Bad Debt Expense = $9,225 3. Net realizable value = $820,000 - $16,725 = $783,275

ID: 2522934 • Letter: P

Question

Percent of Sales Method

At the end of the current year, Accounts Receivable has a balance of $820,000; Allowance for Doubtful Accounts has a credit balance of $7,500; and sales for the year total $3,690,000. 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.

3. Determine the net realizable value of accounts receivable.
$

Accounts Receivable $ Allowance for Doubtful Accounts $ Bad Debt Expense $

Explanation / Answer

SOLUTION

1. Amount for uncollectible accounts = Net sales * 0.0025

= $3,690,000 * 0.0025

= $9,225

2. Accounts Receivable = $820,000

Allowance for Doubtful Accounts = $9,225 + $7,500 = $16,725

Bad Debt Expense = $9,225

3. Net realizable value = $820,000 - $16,725 = $783,275

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Percent of Sales Method At the end of the current year, Accounts Receivable has

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Percent of Sales Method At the end of the current year, Accounts Receivable has

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