CO ezto.mheducation.com/hm.tpx Joey\'s Bike Shop sells new and used bicycle part

Question

CO ezto.mheducation.com/hm.tpx Joey's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, a significant amount of credit sales. During 2016, is first year of operations, Joey's Bike Shop experienced the following $260,000 580,000 Sales on account Cash sales Collections of accounts receivable Uncollectible accounts charged off during the year1.250 235,000 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 (21 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

T- account Account receivable Sales on account 260,000 Cash collection 235,000 uncollectible 1,250 End bal 23,750 Allowance for uncollectible account uncollectible 1,250 uncollectible exp 2600 End bal 1,350 1) Accounts receivable 23,750 2) Allowance for doubtful accounts 1,350 3) uncollectible accounts expense 2600 4) net realizable value (23,750-1350) 22,400 b) Direct write off method 1) Accounts receivable 23,750 2) uncollectible expense account 1,250 3) net realizable value 23,750

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