PE 9-4A Analysis of receivables method

At the end of the current year, Accounts Receivable has a balance of $325,000; Allowance for
Doubtful Accounts has a credit balance of $3,900; and net sales for the year total $4,500,000. Using
the aging method, the balance of Allowance for Doubtful Accounts is estimated as $25,000.

Determine (a) the amount of the adjusting entry for uncollectible accounts; (b) the
adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad
Debt Expense; and (c) the net realizable value of accounts receivable.

Answer:
a. $21,100 ($25,000 – $3,900)    
                                                                                         Adjusted Balance
b. Accounts Receivable.....................................................     $325,000
Allowance for Doubtful Accounts................................             25,000
Bad Debt Expense.........................................................             21,100  

c. Net realizable value ($325,000 – $25,000).................... $300,000

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