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Question 1 fof 11) value: 2.25 polnts Joey\'s Bike Shop sells new and used bicyc

ID: 2548300 • Letter: Q

Question

Question 1 fof 11) value: 2.25 polnts Joey's Bike Shop sells new and used bicycle parts. Although a majority of ts sales are cash sales, it makes a significant amount of credit sales. During 2016, ts first year of operations, Joey's Bike Shop experienced the following S268,700 605,000 Sales on account Cash sales Collections of accounts receivable Uncollectible accounts charged off during the year 255,265 1,479 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 collested. 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 Doubtfut Accounts st December 31,2016, after al 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 reslizable value b, Assume that Joeys Bike Shop uses the direct write-off method of accounting for uncollectible accounts What is the Accounts Receivable balance at December 31, 2016? 2) What is the amount of uncollectible accounts expense for 2016? sylshat is the rnet resizeble valiue of eccounts receivable at December 31. 20167

Explanation / Answer

a. Allowance Method

1. Account Receivable Balance = $268,700

2. Opening Balance of Allowance for Doubtful accounts = $2,687 (1% of $268,700)

Less :- Uncollectible accounts expense = $1,479

Ending Balance of Allowance for Doubtful accounts = $1,208

3. Uncollectible accounts expense for 2016 = $1,479

4. Net Realizable Value = $268,700 - $1,208 - $1,479 = $266,013

b. Direct Write off Method

1. Account Receivable Balance = $268,700

2. Uncollectible accounts expense for 2016 = $1,479

3. Net Realizable Value = $268,700 - $1,479 = $267,221

Item to be subtracted from unadjusted bank balance

Answer : Outstanding checks.

Account Receivable $268,700 Allowance for Doubtful Accounts $1,208 Uncollectible accounts expenses $1,479 Net Realizable Value $266,013
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