Answer:
1. Amount of the adjusting entry for uncollectible accounts:
$4,850
Debit Bad Debts Expense $4,850
Credit Allowance for Doubtful Accounts $4,850
To record bad debts expense for the year.
2. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense:
Accounts Receivable:
Balance as per question = $430,000
Allowance for Doubtful Accounts:
Balance as per question = $4,000
Bad Debt Expense - $4,850
Adjusted balance $8,850
Bad Debt Expense:
Adjustment $4,850
3. The net realizable value of Accounts Receivable:
Accounts Receivable balance $430,000
less Allowance for Doubtful $8,850
Net Realizable Value $421,150
Explanation:
a) Bad Debt Expense = ($1,940,000 x 1%)/4 = $4,850
b) The amount of the adjusting entry for uncollectibles is the bad debt expense of $4,850.
c) The Allowance for doubtful accounts will increase by $4,850 to $8,850.
d) The net realizable value of the accounts receivable is the difference between the accounts receivable balance and the allowance for doubtful accounts. This is the estimated value that the company expects to realize after considering the probability of uncollectibles.
