Question

Percent of Sales Method

At the end of the current year, Accounts Receivable has a balance of $840,000; Allowance for Doubtful Accounts has a credit balance of $7,500; and sales for the year total $3,780,000. Bad debt expense is estimated at 3/4 of 1% of sales.

a. Determine the amount of the adjusting entry for uncollectible accounts.
$

b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.

	Adjusted Balance Debit (Credit)
Accounts Receivable	$
Allowance for Doubtful Accounts	$
Bad Debt Expense	$

c. Determine the net realizable value of accounts receivable.
$

Answer 1

Opening balance
Account receivable	$      840,000.00	Dr
Allowance for doudtful account	$          7,500.00	cr
Net realisable Account receivable	$      832,500.00	Dr
Current year Sales	$ 3,780,000.00
Current year Bad debt expense	$        28,350.00	($37,80,000*1%*3/4)
Adjustment entry for uncollectible account
Accounts & explaination	Debit $	Credit $
Bad debt expense	$        28,350.00
Allowance for doudtful account		$ 28,350.00
(To record current year bad debt expense)
Adjusted balance
Account receivable	$ 4,620,000.00	Dr	($840,000+$37,80,000)
Allowance for doudtful account	$        35,850.00	cr	($7,500+$28,350)
Net realisable Account receivable	$ 4,584,150.00	Dr