Question

At the end of the first year of operations, Yolandi Company had $900,000 in sales and accounts receivable of $350,000. XYZ’s management has estimated that 1.5% of sales will be uncollectible. For the end of 2019, after the adjusting entry for bad debts was journalized, what is the balance in the following accounts:
1. Bad debt expense: ____________
2. Allowance for doubtful accounts: _____________
3. For the end of 2019, what is the company's net realizable value?

Answer 1

Answer:

1. $13,500

2. $13,500

3. $336,500

Explanation:

1. Bad debt expense:

= Sales × Percent of sales uncollectible

= $900,000 × 1.5%

= $13,500

Therefore, the bad debt expense for the year 2019 is $13,500.

2. Allowance for Doubtful accounts = $13,500

3. For the end of 2019, what is the company's net realizable value:

= Accounts receivable - Allowance for Doubtful accounts

= $350,000 - $13,500

= $336,500