Question
The trial balance before adjustment of ABC Company reports the following balances at the end of 2019: Dr. Cr. Accounts receivable $410,000 Unadjusted Allowance for
The trial balance before adjustment of ABC Company reports the following balances at the end of 2019:
Dr. Cr.
Accounts receivable $410,000
Unadjusted Allowance for doubtful accounts $10,200
Sales (all on credit) 910,000
Instructions
a) Prepare the year end adjusting journal entry for bad debt expense assuming that doubtful accounts are estimated to be 3% of gross accounts receivable.
b) Prepare the year end adjusting journal entry for estimated bad debt expense assuming that 6% of credit sales are not expected to be collected.
c) Compute net realizable value of accounts receivable under the % of receivables approach (after the year end adjusting entry to record bad debt expense has been made)
d) Compute net realizable value of accounts receivable under the % of sales approach (after the year end adjusting entry to record bad debt expense has been made)
e) On January 8, 2020, a customer declares bankruptcy and his $1,900 receivable is written off. Prepare the journal entry to record the write-off.
f) Does net realizable value of accounts receivable change after a write off? Explain in a sentence or two.
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