Question by Tobusytocare: At the end of the current year, Accounts Receivable has a balance of 0,000; Allowance for Doubtful Accounts?
I need help!
At the end of the current year, Accounts Receivable has a balance of $ 700,000; Allowance for Doubtful Accounts has a credit balance of $ 5,500; and net sales for the year total $ 3,500,000. Bad debt expense is estimated at 1/2 of 1% of net sales.
a. Determine the amount of the adjusting entry for bad debt expense.
$
b. Determine the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts and Bad Debt Expense.
Adjusted Balance
Accounts Receivable $
Allowance for Doubtful Accounts
Bad Debt Expense
c. Determine the net realizable value of accounts receivable.
$
Best answer:
Answer by Sandy
a. Determine the amount of the adjusting entry for bad debt expense.
When you use the % of net sales method, you ignore the existing balance in the ADA.
1/2 of 1% of net sales = 0.5% x $ 3,500,000 = $ 17,500
b. Determine the adjusted balances of Accounts Receivable, Allowance of Doubtful Accounts and Bad Debt Expense.
Adjusted Balance
Accounts Receivable $ 700,000
Allowance for Doubtful Accounts $ 23,000 ($ 5,500 + $ 17,500)
Bad Debt Expense $ 17,500
c. Determine the net realizable value of accounts receivable.
$ 700,000 – $ 23,000 =
$ 677,000
What do you think? Answer below!
