At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $160,000, and the balance...

At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $160,000, and the balance in Allowance for Doubtful Accounts was $2,700. EZ Tech's sales in 2017 were $1,200,000, 70% of which were on credit. Collections on account during the year were $770,000. The company wrote off $5,000 of uncollectible accounts during the year.

Identify and analyze the adjustments to recognize bad debts assuming that (a) bad debts expense is 3% of credit sales and (b) amounts expected to be uncollectible are 6% of the year-end accounts receivable.

Identify and analyze the adjustments to recognize bad debts assuming that bad debts expense is 3% of credit sales.

Activity	Operating
Accounts	Allowance for Doubtful Accounts Increase, Bad Debts Expense Increase
Statement(s)	Balance Sheet and Income Statement

What is the net realizable value of accounts receivable on December 31, 2017:

1. Using the percentage of sales approach, the net realizable value of the receivables is?
$_____

2. Using the percentage of year-end receivables approach, the net realizable value of the receivables is?
$_____

Expert Solution

1

Particulars	AR	Allowance
Beginning balance	160,000	2700
Credit sales	840,000
Collections	(770,000)
Bad debt expense		25,200
Wrote off	(5,000)	(5,000)
Ending accounts receivable	225,000	22,900
Less: allowance	(22,900)
Net realizable value	202,100

Answer is:

202,100

2

Particulars	AR
Beginning balance	160,000
Credit sales	840,000
Collections	(770,000)
Bad debt expense
Wrote off	(5,000)
Ending accounts receivable	225,000
Less: allowance	(13,500)
Net realizable value	211,500

Answer is:

211,500

please rate.

ekkarill92 answered 1 year ago

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