The following balances appeared in a company's financial statements for the year ended 2018: October 31 2019 2018 Accounts Receivable $100,000 Allowance for Doubtful Accounts $ 1

Q. 1 Bad debt Recoveries during 2019: Let us reconstruct the account Alloowance For Doubtful Accounts as below

Date Dr. Date Cr.

xxxx 4000 01.01 2019 1600

31.12.2019 Bal 1400

Since write offs are debited to Allowance For Doubtful Accounts , there should Have been a a preadjusted debit balance of. 2400 (4000-1600) in the account. But since the actual preadjusted balance is 1400 it means that the amount of bad debt recoveries before providing for the allowance for doubtful accounts for 2019 was =. 2400 -1400 = 1000

The answer to question 1 is 1000

Q2. Since there was a preadjusted debit balance of $1400 in the account of Allowance For Doubtful Accounts, and as the Allowance For Doubtful Accounts required as on December 31st, 2019 is $2000, in order to maintain the required allowance of $2000 in the account, the comapany would have to record a bad debt expense of

= 1400 + 2000 =  $3400.

Note: A credit of $3400 will neutralize the debit balance of 1400 and result in a credit balance of $2000 in the account of Allowance For Doubtful Accounts

The answer to question 2 is 3400

Q3. Calculation of revenue for the year 2019 is as below:

Rate of alloowance for doubtful accounts : 1.2% of accounts receivables

Alloowance for doubtful accounts for 2019 : $2,000

Therefore, the closing balance of accounts receivables as on Dec. 31, 2019 = 2000/ 1.2%% = (2000 * 100) / 1.2 = $166,667

Add cash collections on accounts receivables = 929,533

Sub Total = $166,667 + $929,533 = $1,096,000

Add accounts receivables written off during 2019 = 4000

Total accounts receivables during the year = 996,000 + 4000 = $1,100,000

Less: accounts receivables at the beginning of 2019 = 100,000

Therefore, sales revenue during 2019 is = 1,100,000 - 100,000 =  $1,000,000

The answer to question 3 is 1000000