Question

The accounts receivable balance for Renue Spa at December 31, 2017, was $61,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $3,750. During 2018, $2,100 of accounts receivable were written off as uncollectible. In addition, Renue unexpectedly collected $500 of receivables that had been written off in a previous accounting period. Services provided on account during 2018 were $215,000, and cash collections from receivables were $218,000. Uncollectible accounts expense was estimated to be 2 percent of the sales on account for the period. Required Organize the information in accounts under an accounting equation. Based on the preceding information, compute (after year-end adjustment): (1) Balance of Allowance for Doubtful Accounts at December 31, 2018. (2) Balance of Accounts Receivable at December 31, 2018. (3) Net realizable value of Accounts Receivable at December 31, 2018. What amount of uncollectible accounts expense will Renue Spa for 2018?

Answer 1

Answer:

AR 58,000

allowance 6,900

net account receivable 51,100

bad debt expense for 2018: 4,300

Explanation:

AR 61,000

Allowance 2,100

collection of a write-off account

cash 500

  allowance for doubful account 500

215,000 credit sales - 218,000 collection

↓3,000 decrease in account receivable

uncollectible 2% of sales = 215,000 x 2% = $4,300

bad debt expense 4,300

allowance for doubful accounts 4,300

AR 61,000 - 3,000 = 58,000

Allowance 2,100 + 500 + 4,300 = 6,900

Net AR 51,100

Bad Debt expense 4,300