The following information pertains to Bay Cabinet Company’s sales on account and accounts receivable:

After several collection attempts, Bay Cabinet Company wrote off \($2,800\) of accounts that could not be collected. Bay estimates that uncollectible accounts expense will be 0.5 percent of sales on account.

Required:

a. Compute the following amounts:
(1) Using the allowance method, the amount of uncollectible accounts expense for 2007.
(2) Net realizable value of receivables at the end of 2007.

b. Explain why the uncollectible accounts expense amount is different from the amount that was written off as uncollectible.

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Accounts Receivable Balance, January 1, 2007 $125,400 Allowance for Doubtful Accounts, January 1, 2007 3,250 Sales on Account, 2007 875,000 Cost of Goods Sold, 2007 620,000 Collections of Accounts Receivable, 2007 910,000