Answer:
Net Realizable Value of Accounts receivable $ 1,594,210
Explanation:
Dr Accounts receivable $ 1,776,700
Cr Allowance for Uncollectible Accounts $ 127,430
Net Realizable Value of Accounts receivable $ 1,594,210
Amounts estimated to be uncollectible $ 182,490
Dr Bad Debt Expense $ 55,060
Cr Allowance for Uncollectible Accounts $ 55,060
FINAL BALANCE
Cr Allowance for Uncollectible Accounts $ 182,490
The final net realizable value it's defined as the total gross value of accounts receivable minus the final value estimated as uncollectible.
If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % of estimated value.
Because the company already has a CREDIT balance in the Allowance for Doubtful Accounts it's necessary to register an entry that complement the existing value and reflect the value estimated as bad debts.
Bad accounts are those credits granted by the company and there is no possibility of being charged.
"When customers buy products on credits but the company cannot collect the debt, then it's necessary to cancel the unpaid invoice as uncollectible."
One way is to directly cancel bad debts at the time it was decided that the credit is bad, the total amount reported as bad debt expenses negatively affect the income statement and the accounts receivable are reduced by the same amount, less assets
The other way is to determine a percentage of the total amount of accounts receivable as bad debts, there are many ways to analyze accounts receivable and calculate the value of bad debts.
When the company has the percentage of uncollectible accounts, the required journal entry is Bad Expenses (debit) with Reserve for Bad Accounts (credit)
At the time of cancellation, since the expenses were recognized before, we only use the Allowance for Uncollectible Accounts (Debit) with accounts receivable (credit), with this we are recognizing the bad credit of the company.
