At the end of the current year, Accounts Receivable has a balance of $3,750,000, Allowance for Doubtful Accounts has a credit balance

At the end of the current year, Accounts Receivable has a balance of $3,750,000, Allowance for Doubtful Accounts has a credit balance of $22,750, and sales for the year total $48,400,000. Bad debt expense is estimated at 3⁄4 of 1% of sales.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.

Answer:

a. $363,000 ($48,400,000 × 0.0075) b.

Accounts Receivable......................................................  Allowance for Doubtful Accounts ($22,750 + $363,000)...... Bad Debt Expense......................................................... c. Net realizable value ($3,750,000 – $385,750)........................  Adjusted Balance $3,750,000 363,000 (385,750) Debit (Credit) $3,364,250

At the end of the current year, the accounts receivable account has a debit balance of $6,800,000 and sales for the year total $81,500,000

At the end of the current year, the accounts receivable account has a debit balance of $6,800,000 and sales for the year total $81,500,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:

a. The allowance account before adjustment has a debit balance of $68,250. Bad debt expense is estimated at 3⁄4 of 1% of sales.

b. The allowance account before adjustment has a debit balance of $68,250. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $575,000.

c. The allowance account before adjustment has a credit balance of $45,000. Bad debt expense is estimated at 1⁄2 of 1% of sales.

d. The allowance account before adjustment has a credit balance of $45,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $450,000.

Answer:

a. $611,250 ($81,500,000 × 0.0075) 

b. $643,250 ($575,000 + $68,250) 

c. $407,500 ($81,500,000 × 0.0050)

d. $405,000 ($450,000 – $45,000)