Analysis of Receivables Method At the end of the current year, Accounts Receivable has a balance of $800,000, Allowance for Doubtful Accounts has a credit balance of $7,500, and sales for the year total $3,500,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated

Question

Analysis of Receivables Method

At the end of the current year, Accounts Receivable has a balance of $800,000, Allowance for Doubtful Accounts has a credit balance of $7,500, and sales for the year total $3,500,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $30,000.

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.

Accepted Answer

a. $22,500 ($30,000 – $7,500)

	Adjusted Balance Debit (Credit)
b. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$800,000
Allowance for Doubtful Accounts . . . . . . . . . . . . . . . . .	(30,000)
Bad Debt Expense. . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .	22,500

c. $770,000 ($800,000 – $30,000)

Question 9.4: Analysis of Receivables Method At the end of the current yea...

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