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3 October, 01:06

The following information is available for Quality Book Sales's sales on account and accounts receivable:

Accounts Receivable Balance, January 1, Year 2 $ 78,500

Allowance for Doubtful Accounts, January 1, Year 2 4,710

Sales on Account, Year 2 550,000

Collections of Accounts Receivable, Year 2 556,000

After several collection attempts, Quality Book Sales wrote off $2,850 of accounts that could not be collected. Quality Book Sales estimates that 0.5 percent of sales on account will be uncollectible.

Required

Compute the following amounts:

(1) Using the allowance method, the amount of uncollectible accounts expense for Year 2.

(2) Net realizable value of receivables at the end of Year 2.

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Answers (1)
  1. 3 October, 01:16
    0
    1) Amount of uncollectible accounts expenses is $ 2,750

    2) Net realizable value of receivables at the end of Year 2 is $65,040

    Explanation:

    Accounts Receivable Balance, January 1, Year 2 = $ 78,500

    Allowance for Doubtful Accounts, January 1, Year 2 = $4,710

    Sales on Account, Year 2 = $550,000

    Collections of Accounts Receivable, Year 2 = $556,000

    1) Amount of uncollectible accounts expenses = $550,000 * 0.5% = $ 2,750

    2) Allowance for doubtful accounts, beginning balance = $4,710

    Less: Write off = $ - 2,850

    Add: Uncollectible accounts expense for the year = $2,750

    Allowance for doubtful accounts, ending balance = $4,610

    Accounts receivable, Beginning balance = $78,500

    Add: Credit sales = $550,000

    Less: Collections = $-556,000

    Less: Write off = $-2,850

    Accounts receivable, Ending balance = $69,650

    Accounts receivable, Ending balance = $69,650

    Less: Allowance for doubtful accounts, ending balance = $-4,610

    Net realizable value = $65,040
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