At the end of the current year, Accounts Receivable has a balance of $3,460,000, Allowance for Doubtful Accounts has a debit balance of $12,500, and sales for the year total $46,300,000. Bad debt expense is estimated at 1⁄2 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. $231,500 ($46,300,000 × 0.0050) b. Accounts Receivable...................................................... Allowance for Doubtful Accounts ($231,500 – $12,500)...... Bad Debt Expense......................................................... c. Net realizable value ($3,460,000 – $219,000)....................... $3,241,000
