Asked by Gloria Kirby on Jun 29, 2024
Verified
At the end of the current year, Accounts Receivable has a balance of $700,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $3,500,000. Bad debt expense is estimated at ½ of 1% of net sales.?Determine
(a) the amount of the adjusting entry for bad debt expense;
(b) the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense; and
(c) the net realizable value of accounts receivable.
Net Sales
The amount of revenue generated from sales of goods or services after deducting returns, allowances, and discounts.
Adjusting Entry
A journal entry made in the accounting records to update the balances of certain accounts and accurately reflect the financial position before preparing financial statements.
Bad Debt Expense
An expense reported on the income statement, reflecting the cost of accounts receivable that are not expected to be collected.
- Determine the cost associated with non-collectible accounts and apprehend its repercussion on financial statements.
Verified Answer
JA
Jennifer AlbertJul 02, 2024
Final Answer :
(a) $17,500($3,500,000×0.005) Adjusted Balance (b) Accounts Receivable $700,000 A.llowance for Doubtful Accounts ($5,500+23,000$17,500) Bad Debt Expense 17,500 (c) Net realizable value ($700,000−$23,000)$677,000\begin{array} { | l | l | r | } \hline \text { (a) } & \$ 17,500 ( \$ 3,500,000 \times 0.005 ) & \\\hline & & \text { Adjusted Balance } \\\hline \text { (b) } & \text { Accounts Receivable } & \$ 700,000 \\\hline & \text { A.llowance for Doubtful Accounts } ( \$ 5,500 + & 23,000 \\& \$ 17,500 ) & \\\hline & \text { Bad Debt Expense } &17,500 \\\hline & & \\\hline \text { (c) } & \text { Net realizable value } ( \$ 700,000 - \$ 23,000 ) &\$ 677,000 \\\hline\end{array} (a) (b) (c) $17,500($3,500,000×0.005) Accounts Receivable A.llowance for Doubtful Accounts ($5,500+$17,500) Bad Debt Expense Net realizable value ($700,000−$23,000) Adjusted Balance $700,00023,00017,500$677,000
Learning Objectives
- Determine the cost associated with non-collectible accounts and apprehend its repercussion on financial statements.