Allowance Method for Accounting for Bad Debts At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $234,000, and the balance in Allowance for Doubtful Accounts was $4,000. EZ Tech's sales in 2017 were $1,760,000, 80% of which were on credit. Collections on account during the year were $1,120,000. The company wrote off $7,000 of uncollectible accounts during the year.
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Allowance Method for Accounting for Bad Debts At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $234,000, and the balance in Allowance for Doubtful Accounts was $4,000. EZ Tech's sales in 2017 were $1,760,000, 80% of which were on credit. Collections on account during the year were $1,120,000. The company wrote orr $7,000 of uncollectible accounts during the year. Required: 1. Identify and analyze the sales during 2017. Activity Operating Accounts Cash Increase, Accounts Receivable Increase, Sales Revenue Increase Statement(s) Balance Sheet and Income Statement Foodhack Net How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign a , . Balance Sheet Income Statement Stockholders Assets Liabilities Equity Revenues Expenses Cash 1,753,000 X No Entry 0 1,753,000 x Sales Revenue 1,753,000 X No Entry Accounts Receivable 1,753,000 X No Entry 0 0 No Entry 0 No Entry Income 0 1,253,000 0 0 Feedback Identify and analyze the transactions related to the collections of cash during 2017, Activity Operating Accounts Cash Increase, Accounts Receivable Decrease Statement(s) Balance Sheet only b. Identify and analyze the adjustments to recognize bad debts assuming that amounts expected to be uncollectible are 5% of the year-end accounts receivable. Activity Operating Accounts Allowance for Doubtful Accounts Increase, Bad Debts Expense Increase Statement(s) Balance Sheet and Income Statement Foodback How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. If a contra account is decreased, it will have the effect of increasing the corresponding financial statement item. Balance Sheet Income Statement Stockholders Net Assets Liabilities Equity Revenues Expenses Income allowance for Doubtful Accounts 31,320 x No Entry 0 31,320 X No Entry 0 Bad Debts Expense 31,320 X 31,320 Foodback 3. What is the net realizable value of accounts receivable on December 31, 2017, under each assumption in part (2) Using the percentage of sales approach, the net realizable value of the receivables is? , 465,680 X Using the percentage of year-end receivables approach, the net realizable value of the receivables is? 490,680 X 4. The recognition of bad debts expense reduces the net realizable value by the amount recorded in bad debts expense and the allowance for doubtful accounts The write-off of accounts has no effect on the net realizable value
