Question
ABC Ltd. had the following account balances as at December 31, 2021: Notes Receivable $175,000 Interest Receivable (on Notes Receivable) $729 In 2022, ABC Ltd.
ABC Ltd. had the following account balances as at December 31, 2021:
Notes Receivable $175,000
Interest Receivable (on Notes Receivable) $729
In 2022, ABC Ltd. had the following transactions:
March 31 Received payment for the above notes receivable. The note was received on November 30, 2021 with a 5% interest rate. The interest is paid at maturity.
June 6 Wrote-off the account of John Smith in the amount of $32,500.
Sept 1 Received a promissory note from Paul Jones in the amount of $105,000 in order to get a time extension on his past due accounts receivable. The note matures on November 30 and pays interest of 6% at maturity.
Nov 30 Paul Jones dishonours the note. ABC Ltd. expects Paul Jones to pay the note.
Dec 31 The company estimates that 5% of its Accounts Receivable will be uncollectible. As at December 31, 2022, the Accounts Receivable balance was $530,000 and the Allowance for Doubtful Accounts balance (before the year end adjusting entry) was $15,000 (credit balance)
Required: 1. Prepare the above journal entries including adjusting entries.
2. What is the net realizable value of Accounts Receivable as at December 31, 2022 after the adjusting entry?
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