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Analysis of Receivables Method At the end of the current year, Accounts Receivable has a balance...

Analysis of Receivables Method

At the end of the current year, Accounts Receivable has a balance of $455,000; Allowance for Doubtful Accounts has a credit balance of $4,000; and sales for the year total $2,050,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $19,600.

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.

Accounts Receivable	$
Allowance for Doubtful Accounts	$
Bad Debt Expense	$

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

Note Receivable

Quick Tire and Lube received a 120-day, 9% note for $84,000, dated April 9, from a customer on account. Assume 360 days in a year.

a. Determine the due date of the note.

b. Determine the maturity value of the note.
$

c. Journalize the entry to record the receipt of the payment of the note at maturity. If an amount box does not require an entry, leave it blank.

Solutions

Expert Solution

a)Opening Balance of doubtful accounts = $4000

Closing balance of doubtful accounts = $ 19600

Amount of adjusting entry required = $(19600-4000) = $15600

b) Accounts receivable = $455000

Allowance for doubtful debts = $19600

Bad debt expense = $15600

c) Net realisable value of accounts receivable = $(455000-19600) = $435400

When the credit balance of the allowance for doubtful accounts is set off from the accounts receivable account, the balance figure is the net realisable value of accounts receivable.

NOTES RECEIVABLE:

a)Assuming there are 360 days in the year , there are 30 days in each month. Hence, since the maturity period of the note is after 120 days, the due date of the note would be August 9th.

b) Interest on the note = 84000*120/360*9/100 = $2520

hence, the maturity value of the note = 84000+2520 = $86520

Debit ($) Credit ($)

c) Cash A/c 86520

9% Notes receivable 84000

Interest Income 2520

(Being amount received & interest income recogised)

Looking forward to your upvote. Thanks!!

ekkarill92 answered 1 year ago

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