Question

At the end of the current year, Accounts Receivable has a balance of $98,880; Allowance for Doubtful Accounts has a debit balance of $3,556; and sales for the year total $1,108,000. Bad debt expense is estimated at 1/2 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

allowance for doubtful account has credit balance

if it has debit balance it means that actual bad debt was higher than estimated

(1) calculate bad debt

=sales*1%*1/2

=$1,108,000*1%*1/2

=$5,540

now, allowance for doubtful account has debit balance $3,556

so,total bad debt would be $9,096($5,540+$3,556) as allowance for doubtful acount have debit balance we will add it to bad debt expense

Journal entry :

		Debit	Credit
	bad debt expense	$9,096
	allowance for doubtful account		$9,096

(2) Accounts receivable will remain unaffected at $98,880

Allowance for doubtful account will have balance $5,540 credit

Beg. bal	$3,556	$9,096	entry as above
		$5,540	end bal [$9,096-$3,556]

bad debt expense will have balance $9,096

(3) Net realiable value of accoutn recevable is

Account receivable	$98,880
Less: allowance for doubtful account	($5,540)
Net realizable value [$98,880-$5,540]		$93,340