Question

Analysis of Receivables Method

At the end of the current year, Accounts Receivable has a balance of $465,000; Allowance for Doubtful Accounts has a debit balance of $4,000; and sales for the year total $2,090,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $20,800.

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.
$

Answer 1

• All working forms part of the answer
• Requirement ‘a’

Unadjusted Balance of Allowance for Doubtful account	$          4,000.00	Debit
Adjusted balance that should exist using aging method	$       20,800.00	Credit
Amount of adjusting entry for uncollectible accounts	$       24,800.00	Account to be credited with $24,800 [$4000 for making debit balance go, $20800 for making balance equal to $20800 credit balance.

Journal Entry with the Amount of adjusting entry:

Accounts title	Debit	Credit
Bad Debt Expenses	$       24,800.00
Allowance for Doubtful accounts		24800
(bad debt expense recorded)

• Requirement (b)

Adjusted Balances

Accounts receivables	$    4,65,000.00	Debit
Allowance for Doubtful Accounts	$       20,800.00	Credit
Bad Debt expense	$       24,800.00	Debit

• Requirement (c)

Gross Accounts Receivables	$    4,65,000.00
Allowances for Doubtful Accounts	$     (20,800.00)
Net Realizable value of Accounts receivables	$    4,44,200.00