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

Question

Percent of Sales Method

At the end of the current year, Accounts Receivable has a balance of $485,000; Allowance for Doubtful Accounts has a credit balance of $4,500; and sales for the year total $2,180,000. Bad debt expense is estimated at 3/4 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.
$

Explanation / Answer

Here the net sale = 2180000 x 3/4 x 0.01 = 2180000 x 0.0075 = $16350

This is required adjusting allowences for doubtfull/uncollectible accounts. This is the answer of part (a)

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Now as adjusted balances of account receivable = balance in account recievable + total sale - bad debt expense

=485000 + 2180000 - 16350= $ 2648650

Further allownce for debtfull account = 16350 - 4500 = 11850

and bed debt allowance = 16350

that we calculated in part (a) also.

This is the answer of question (2).

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