Question

At the end of the current year, Accounts Receivable has a balance of $990,000; Allowance for Doubtful Accounts has a debit balance of $9,000; and sales for the year total $4,460,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $110,000.a. Determine the amount of the adjusting entry for uncollectible accounts.
b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.
c. Determine the net realizable value of accounts receivable.

Answer 1

Explanation:

The computation is shown below:

a. The amount for uncollectible accounts is

= Estimated balance of Allowance for doubtful accounts + Debit balance of allowance account

= $110,000 + $9,000

= $119,000

b. The adjusted balance

For account receivable = $990,000

For Allowance for doubtful debts = $110,000

Bad debt expense = $119,000

c. The net realizable value of account receivable is

= Account receivable - allowance for doubtful debts

= $990,000 - $110,000

= $880,000