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At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,500,000. An analysis of receivables estimates uncollectible receivables as $25,000. Determine the amount of the adjusting entry for bad debt expense and the adjusted balance of Allowance for Doubtful Accounts, respectively.

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Answer:

Amount of Adjusting Entry for Bad Debts  

Estimated uncollected Receivables                             $25,000.00

Less: Existing Provision                                                  $5,500.00

Adjusting Amt. for Bad Debts                                        $19,500.00

Adjusted Balance of  

Accounts Receivables                                                    $550,000.00

Allowance for Doubtful Accounts                                  $25,000.00

Bad Debts expense                                                       $19,500.00

Net Realizable Value of Accounts Receivables  

Accounts Receivables                                                    $550,000.00

Less: Allowance for Doubtful Accounts                       (-$25,000.00)

Net Realizable Value                                                     $525,000.00

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