Southwest Pediatrics has the following balances on December 31, 2018, before any adjustment: Accounts Receivable = $130,000; Allowance for Uncollectible Accounts = $2,100 (debit). On December 31, 2018, Southwest estimates uncollectible accounts to be 20% of accounts receivable. Required: 1. Record the adjustment for uncollectible accounts on December 31, 2018. 2. Determine the amount at which bad debt expense is reported in the income statement and the allowance for uncollectible accounts is reported in the balance sheet. 3. Calculate the net realizable value of accounts receivable.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
I am having issues understading what needs to happen with this question, please help, so fart this is how I understand it but it is a bit confusing.
| December 31, 2018 | Debit | Credit |
| $ 130,000.00 | ||
| Bad Debt Expense (Est Uncollectible for new period $26,000 - Previous Bad Debt 2,100 (debit) |
$ 23,900.00 | |
| Allowance for Uncollectible Accounts (Establish an allowance for future ($130,000 x 20% = $26,000) - Debit of $2,100 |
$ 23,900.00 |
Thank you
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