Analysis of Receivables Method At the end of the current yea

Analysis of Receivables Method

At the end of the current year, Accounts Receivable has a balance of $465,000; Allowance for Doubtful Accounts has a debit balance of $4,000; and sales for the year total $2,090,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $20,800.

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.

c. Determine the net realizable value of accounts receivable.
$

Solution

Answers

Unadjusted Balance of Allowance for Doubtful account

$          4,000.00

Debit

Adjusted balance that should exist using aging method

$       20,800.00

Credit

Amount of adjusting entry for uncollectible accounts

$       24,800.00

Account to be credited with $24,800 [$4000 for making debit balance go, $20800 for making balance equal to $20800 credit balance.

Journal Entry with the Amount of adjusting entry:

Accounts title

Debit

Credit

Bad Debt Expenses

$       24,800.00

Allowance for Doubtful accounts

24800

(bad debt expense recorded)

Adjusted Balances

Accounts receivables

$    4,65,000.00

Debit

Allowance for Doubtful Accounts

$       20,800.00

Credit

Bad Debt expense

$       24,800.00

Debit

Gross Accounts Receivables

$    4,65,000.00

Allowances for Doubtful Accounts

$     (20,800.00)

Net Realizable value of Accounts receivables

$    4,44,200.00