Question

At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the net realizable value of accounts receivable after adjustment. (Hint: Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts.)

Answer 1

Answer:

1.Net Realizable value $530,500

2.$19,500

Explanation:

1. Calculation for Determining the net realizable value of accounts receivable after adjustment will be

Ending Account receivable $550,000- $19,500

Net Realizable value=$530,500

2. Calculation to determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts

The Allowance for Doubtful Accounts = $25,000

Using this formula

Bad debts expense = Ending Allowance for Doubtful Accounts - Beginning Allowance for Doubtful Accounts

Let plug in the formula

= 25,000 - 5,500

= $19,500