### Analysis of Receivables Method#### OverviewAt the end of the current year, the following data related to receivables is available:- **Accounts Receivable:** $820,000- **Allowance for Doubtful Accounts:** Debit balance of $7,500- **Total Sales for the Year:** $3,690,000- **Estimated Balance for Allowance for Doubtful Accounts using the Aging Method:** $29,300#### Steps to Determine Adjusted Balances and Net Realizable Value1. **Determine the Amount of the Adjusting Entry for Uncollectible Accounts** - The adjusting entry is computed to bring the Allowance for Doubtful Accounts to the estimated balance. 2. **Determine the Adjusted Balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense** - The adjusted balances need to reflect the true financial position of the company at year-end.3. **Determine the Net Realizable Value of Accounts Receivable** - Net realizable value indicates the amount expected to be collected from accounts receivable.#### Calculations and Explanations**a. Determination of Adjusting Entry for Uncollectible Accounts:**\[ \text{Adjusting Entry Amount} = \text{Estimated Allowance for Doubtful Accounts} - \text{Current Debit Balance of Allowance for Doubtful Accounts} \]\[ \text{Adjusting Entry Amount} = \$29,300 - \$7,500 \]**b. Adjusted Balances:**- **Accounts Receivable:**\[ \text{Accounts Receivable} = \$820,000 \]- **Allowance for Doubtful Accounts:**\[ \text{Adjusted Balance} = \$29,300 \]- **Bad Debt Expense:**\[ \text{Bad Debt Expense} = \$21,800 \] > This represents the amount of the adjusting entry determined in step (a).**c. Net Realizable Value of Accounts Receivable:**\[ \text{Net Realizable Value} = \text{Accounts Receivable} - \text{Adjusted Allowance for Doubtful Accounts} \]\[ \text{Net Realizable Value} = \$820,000 - \$29,300 \]#### Diagram DescriptionWhile the image does not contain graphs or diagrams, the provided calculations and explanations help portray the detailed steps and resulting figures. Text

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At the end of the current year, Accounts Receivable has a balance of $820,000; Allowance for Doubtful Accounts has a debit balance of $7,500; and sales for the year total $3,690,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $29,300. a. Determine the amount of the adjusting entry for uncollectible accounts. b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense c. Determine the net realizable value of accounts receivable.

At the end of the current year, Accounts Receivable has a balance of $820,000; Allowance for Doubtful Accounts has a debit balance of $7,500; and sales for the year total $3,690,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $29,300. a. Determine the amount of the adjusting entry for uncollectible accounts. b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense c. Determine the net realizable value of accounts receivable.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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