At the end of the current year, Accounts Receivable has a balance of $425,000, Allowance for Doubtful Accounts has a debit balance of $4,000, and sales for the year total $1,910,000. Bad debt expense is estimated at 1.1% of sales. 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.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
a. Determine the amount of the
b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and
c. Determine the net realizable value of accounts receivable.
![Percent of Sales Method
At the end of the current year, Accounts Receivable has a balance of $425,000, Allowance for Doubtful
Accounts has a debit balance of $4,000, and sales for the year total $1,910,000. Bad debt expense is
estimated at 1.1% of sales.
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.
Adjusted Balance
Debit (Credit)
Accounts Receivable
425,000
Allowance for Doubtful Accounts
Bad Debt Expense
c. Determine the net realizable value of accounts receivable.
Feedback
V Check My Work
a. Remember that since accounts receivable are created by credit sales, uncollectible accounts can
be estimated as a percent of credit sales. If the portion of credit sales to sales is relatively constant,
the percent may be applied to total sales.
b. Under the percent of sales method, the amount of the adjustment is the amount estimated for Bad
Debt Expense.
c. Remember that net realizable value is the amount that is expected to be collected or realized.
%24](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1de1597e-eb9b-451a-b9e5-f73d94038120%2Fa32e3cff-55d1-4b94-8934-b7f5c9b3bab5%2Fet5ef5j_processed.png&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Learn your way
Includes step-by-step video
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![College Accounting, Chapters 1-27](https://www.bartleby.com/isbn_cover_images/9781337794756/9781337794756_smallCoverImage.gif)
![Cornerstones of Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)
![College Accounting, Chapters 1-27](https://www.bartleby.com/isbn_cover_images/9781337794756/9781337794756_smallCoverImage.gif)
![Cornerstones of Financial Accounting](https://www.bartleby.com/isbn_cover_images/9781337690881/9781337690881_smallCoverImage.gif)