Question

At the end of the current year, Accounts Receivable has a balance of $969,540 Allowance for Doubtful Accounts has a credit balance of $5,287 and sales for the year total $2,224,000. Bad debt expense is estimated at ½ of 1% of sales.

a. Determine the amount of the adjusting entry for bad debt expense.
$

b. Determine the adjusted balances of Accounts Receivable, Allowance for 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.
$

Answer 1

• All working forms part of the answer
• Requirement a

A	Sale	$     2,224,000.00
B	Bad Debt Expense % of Sale	50% of 1% of above
C = A x 1% x 1/2	Bad Debt Expenses [ 2224000 x 1% x 50%]	$           11,120.00

Amount of adjusting entry for Bad Debt Expense = $ 11,120

• Requirement b

Adjusted Balance
Accounts Receivable		$     969,540.00
Allowance for Doubtful Accounts	[5287 + 11120]	$       16,407.00
Bad Debt Expense		$          11,120.00

• Requirement C

Accounts Receivable	$         969,540.00
Less: Allowance for Doubtful Account	$           16,407.00
Net Realizable Value	$         953,133.00