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Analysis of receivables method OBJ
Analysis of receivables method OBJ. 4 At the end of the current year, Accounts Receivable has a balance of $1,975,000; Allowance for Doubtful Accounts has a credit balance of $19,670; and sales for the year total $28,550,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $225,000. 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.
Expert Solution
The computation of amount of adjusting entry for uncollectible accounts is shown below:-
Bad Debt expense Dr, $205,330 ($19,670 - $225,000)
To Allowance for doubtful debts $$205,330
(b) The adjusted balances of Accounts Receeivable, Allowance for Doubtful Accounts, and Bad debt expense is
Accounts receivable = $1,975,000
Allowance for Doubtful Accounts = $225,000
Bad debt expense = $205,330
(c) The net realizable value of accounts receivable is
= Accounts receivable - Allowance for Doubtful Accounts
= $1,975,000 - $225,000
= $1,750,000
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