Question

Kim and Kim Company’s balance sheet at December 31, 2017, reported the following:

Accounts receivable............................................................... $2,000,000

Allowance for uncollectible accounts.....................................$20,000 DR

Requirements:

1. What was the net realizable value of these receivables at December 31, 2017?

2. Journalize, without explanations, 2018 entries for Super Duper:

a. Total credit sales for 2018 were $1,200,000; 2% of sales were estimated to be uncollectible. Super-Duper received cash payments on account during 2018 of $780,000.

b. Accounts receivable identified to be uncollectible totaled $38,000.

c. December 31, 2018, aging of receivables indicates that $43,000 of the receivables is uncollectible (target balance).

3. Post the transactions to the Accounts receivable and the Allowance for uncollectible accounts T-accounts. Calculate and report Super Duper’s receivables and related allowance on the December 31, 2018 balance sheet.

4. What is the net realizable value of receivables at December 31, 2018?

5. How much is the uncollectible account expense for 2018?

Answer 1

1)

Accounts receivable	2,000,000
Less: Allowance for uncollectible accounts	- (-20000 )   [since Debit Balance ]
Net realizable value	2,020,000

**Allowance account has a normal credit balance so when it has debit balance at end it is denoted with - sign

2)

Date	Account title	Debit	credit
a	Accounts receivable	1200000
	Sales revenue		1200000
a-2	cash	780000
	Accounts receivable		780000
b	Allowance for uncollectible accounts	38000
	Accounts receivable		38000
c	Bad debt expense	101000
	Allowance for uncollectible accounts		101000

** Allowance for uncollectible accounts at end =Beginning balance+Bad debt expense- write offs

        43000 = -20000+BD - 38000

        43000 =BD - 58000

     Bad debt expense = 43000 +58000

              = 101000

3)

ACCOUNTS RECEIVABLE
Beginning balance	2000000	a-2)collections	780000
a-1)sales	1200000	b)write off	38000
Balance at end	2382000

Allowance for uncollectible accounts
Beginning Balance	20000	Bad debt expense	101000
Write off	38000
		Balance at end	43000

4)

Accounts receivable	2382000
Less: Allowance for uncollectible accounts	-43000
Net realizable value	2339000

5) uncollectible account expense for 2018 = 101000