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At the end of the current year, Accounts Receivable has a balance of $3,000,000; Allowance for...

At the end of the current year, Accounts Receivable has a balance of $3,000,000; Allowance for Doubtful Accounts has a debit balance of $475,000; and Net Sales for the year total $6,500,000. Bad Debt Expense is estimated at 3/4 of 1% of Net Sales.

  1. Calculate the dollar amount required to record the allowance amount.
  2. Prepare the adjusting journal entry for the Allowance for Doubtful Accounts:

Date

Accounts

Dr

Cr
  1. Calculate the Net Accounts Receivable Balance

Solutions

Expert Solution

Working Notes: 1
CALCULATION OF ALLOWANCE ACCOUNT ON THE BASIS OF % OF NET SALES
Net Sales $            6,500,000
1% of net sales 1%
Estimated amount $                  65,000
Estimated amount of uncollectable = ($ 65,000 X 3 /4) $                  48,750
Working Notes: 2
CALCULATION OF BAD DEBT EXPENSES OF THE YEAR
Estiamted amount of uncollectable of the year $                  48,750 Credit
Add: Allowance for Doubtfull Debts (Opening Bal.) $                475,000 Debit  
Balance need to be make entry of Bad Debt $                523,750 Credit
Bad debts expenses recognise in the year = $                523,750
SOLUTION: 1
Journal Entries
Date Account Title and explanation Debit Credit
------- Bad Debt Expenses $                523,750
       Allowance for Doubtful Account $                  523,750
(To record the bad debt Expenses)
SOLUTION: 2
CALCULATION OF NET ACCOUNT RECEIVABLE
Account Receivable $            3,000,000
Less: Allowance for Doubtfull Account $                523,750
Net Account Receivable $            2,476,250

ekkarill92 answered 2 years ago
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