Question
On January 1, 2017, the accounting records of Chandler Company Limited included a debit balance in accounts receivable of $6,536,000 and a credit balance in
On January 1, 2017, the accounting records of Chandler Company Limited included a debit balance in accounts receivable of $6,536,000 and a credit balance in the allowance for doubtful accounts of $188,000. During 2017, Chandler had sales on account of $14,193,000. During 2017, cash collections of accounts receivable totalled $15,227,000. During 2017, write-offs of uncollectible accounts receivable totalled $171,000. Chandler uses the aging method to estimate the percentage of accounts receivable expected to become uncollectible. Chandler estimates that 3.5% of the December 31, 2017 accounts receivable will be uncollectible.
REQUIRED:
a. Prepare the journal entry to record the bad debt expense for the year ended December 31, 2017.
b. Calculate the net realizable value at which accounts receivable will be disclosed on the December 31, 2017 statement of financial position. c. Assume that Chandler had used the percentage of sales approach to record uncollectible accounts. Calculate the bad debt expense for 2017, assuming that a rate of 1.0% of sales was used and an entry was not recorded to reflect the adjustment to percentage of accounts receivable
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