Answer and Explanation:
a. The computation of uncollectible accounts and Journal entry is shown below:-
Bad Debt expenses Dr, $6,650
($2,660,000 × 1 ÷ 4× 1%)
To Allowance for doubtful accounts $6,650
(Being uncollectible accounts is recorded)
b. The computation of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense is shown below:-
Accounts receivable = $590,000
Allowance for Doubtful Accounts = (Sales of the year × 1 ÷ 4 × 1%) - Credit balance
= ($2,660,000 × 1 ÷ 4 × 1%) - $5,500
= $6,650 - $5,500
= $1,150
Bad debt expenses = Sales of the year × 1 ÷ 4 × 1%
= $2,660,000 × 1 ÷ 4 × 1%
= $6,650
c. The computation of net realizable value of accounts receivable is shown below:-
Net realizable value = Accounts receivable - Allowance for Doubtful Accounts
= $590,000 - $1,150
= $588,850
