PE 9-4A Analysis of receivables method

At the end of the current year, Accounts Receivable has a balance of $685,000; Allowance for Doubtful Accounts has a credit balance of $9,000; and net sales for the year total $7,400,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $50,000.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and (c) the net realizable value of accounts receivable.


Answer:

a. $41,000 ($50,000 – $9,000)
b. Adjusted Balance
Accounts Receivable………………………………………………… $685,000
Allowance for Doubtful Accounts………………………………… 50,000
Bad Debt Expense……………………………………………………… 41,000
c. Net realizable value ($685,000 – $50,000)………………………… $635,000