Question

Use the following information to answer questions #54-55

Your business uses the allowance method to account for uncollectible receivables. At the beginning of

the year, the balance in accounts receivable was $10,000 and the balance in the allowance for doubtful

accounts (AFDA) was $1,800. During the year the business had sales on account of $25,000 and wrote

off a $2,000 uncollectible account. The company estimates that 7% of their receivables won’t be

collectible.

54. What is the uncollectible accounts (bad debt) expense for the year?

a.$2,510

b. $2,310

c.$2,110

d. $510

55. What is the net realizable value of accounts receivable at the end of the year?

a.$30,890

b. $33,000

c.$30,490

d. $30,690

PLEASE EXPLAIN

Answer 1

54. Uncollectible accounts (bad debt) expenses for the year.
Beginning balance in accounts receivable	$10,000
Accounts receivable added during the year	$25,000
Total accounts receivable	$35,000
Less: Uncollectible accounts written off	($2,000)
Net accounts receivable	$33,000
7% of accounts receivable estimated to be uncollectible	$2,310
Add: Bad debts written off in current year ($2000-$1800) $200 (Bad debts written off - AFDB)
Uncollectible accounts (bad debt) expenses for the year.	$2,510
55. Net realizable value of accounts receivable at the end of the year
Beginning balance in allowance for doubtful accounts	$1,800
Less: Bad debts written off	($2,000)
Add: Allowance for uncollectible accounts for current year	$2,310
Ending balance in allowance for doubtful accounts	$2,110
Net accounts receivable	$33,000
Ending balance in allowance for doubtful accounts	($2,110)
Net realizable value of accounts receivable at the end of the year	$30,890