Percent of Sales 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. Bad debt expense is estimated at ½% of sales. Determine (a) the amount of the adjusting

Question

Percent of Sales 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. Bad debt expense is estimated at ½% of sales.

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. $17,500 ($3,500,000 × 1/2%)

	Adjusted Balance Debt (Credit)
b. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$800,000
Allowance for Doubtful Accounts ($7,500 + $17,500) . . . . . . . . . . . . . . . . . . . . . . . . . .	(25,000)
Bad Debt Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17,500

c. $775,000 ($800,000 – $25,000)

Question 9.3: Percent of Sales Method At the end of the current year, Acco...

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