PE 9-4B Analysis of receivables method

At the end of the current year, Accounts Receivable has a balance of $3,460,000; Allowance for Doubtful Accounts has a debit balance of $12,500; and net sales for the year total $46,300,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $245,000.

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. $257,500 ($245,000 + $12,500)
b. Adjusted Balance
Accounts Receivable………………………………………………… $3,460,000
Allowance for Doubtful Accounts………………………………… 245,000
Bad Debt Expense……………………………………………………… 257,500
c. Net realizable value ($3,460,000 – $245,000)…………………… $3,215,000