PROBLEM #1
At the beginning of the year, Sonoran Park Equipment's accounts receivable balance was $105,000 and the allowance for doubtful accounts had a $1,950 credit. Sonoran's sales in the current year were $787,500, 80% of which were on credit. Collections on account during the year were $502,000. Additionally, Sonoran wrote off $3,000 of uncollectible accounts during the year. It is estimated that 6% of the year end accounts receivable are expected to be uncollectible.
Using the allowance for bad debts based on accounts receivable aging method, determine the journal entry for the estimate of bad debts. What is Sonoran's net realizable value of accounts at the end of the year?
Journal Entry
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B. Net Realizable Value
PROBLEM #1
At the beginning of the year, Sonoran Park Equipment's accounts receivable balance was $105,000 and the allowance for doubtful accounts had a $1,950 credit. Sonoran's sales in the current year were $787,500, 80% of which were on credit. Collections on account during the year were $502,000. Additionally, Sonoran wrote off $3,000 of uncollectible accounts during the year. It is estimated that 6% of the year end accounts receivable are expected to be uncollectible.
Using the allowance for bad debts based on accounts receivable aging method, determine the journal entry for the estimate of bad debts. What is Sonoran's net realizable value of accounts at the end of the year?
Journal Entry
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B. Net Realizable Value
Related questions
12. Raintree Cosmetic Company sells its products to customers ona credit basis. An adjusting entry for bad debt expense is recordedonly at December 31, the companyâs fiscal year-end. The 2015balance sheet disclosed the following: |
| Current assets: | |||||
| Receivables, net of allowance for uncollectibleaccounts of $39,000 $477,000 | |||||
During 2016, credit sales were $1,795,000,cash collections from customers $1,875,000, and $44,000 in accountsreceivable were written off. In addition, $3,900 was collected froma customer whose account was written off in 2015. An aging ofaccounts receivable at December 31, 2016, reveals thefollowing: |
| Percentage of Year-End | Percent | ||||
| Age Group | Receivables in Group | Uncollectible | |||
| 0â60 days | 70 | % | 5% | ||
| 61â90 days | 20 | 15 | |||
| 91â120 days | 5 | 20 | |||
| Over 120 days | 5 | 40 | |||
| Required: |
| 2. | Prepare the year-endadjusting entry for bad debts according to each of the followingsituations: |
| a. | Bad debt expense isestimated to be 4% of credit sales for the year. |
| b. | Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isestimated to be 10% of the year-end balance in accountsreceivable. |
| c. | Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isdetermined by an aging of accounts receivable. |
(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.) | |
| 3. | For situations (a)â(c) in requirement 2 above, what would be thenet amount of accounts receivable reported in the 2016 balancesheet? |
