At the end of the current year, Accounts Receivable has a balance of $680,000; Allowance for Doubtful Accounts has a debit balance of $6,000; and sales for the year total $3,060,000. Bad debt expense is estimated at 1/4 of 1% of sales.

**a.**  Determine the amount of the adjusting entry for uncollectible accounts.
fill in the blank 1 of 1$

**b.**  Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense.

Line Item DescriptionAmountAccounts Receivable

$fill in the blank 2

Allowance for Doubtful Accounts

$fill in the blank 3

Bad Debt Expense

$fill in the blank 4

**c.**  Determine the net realizable value of accounts receivable.
fill in the blank 1 of 1$

To solve this problem, we'll work through the steps to find the values for each part.

### **Part (a): Adjusting entry for uncollectible accounts**

Bad debt expense is estimated at 1/4 of 1% of sales. Let's calculate that:

\[
\text{Bad Debt Expense} = 0.0025 \times \text{Sales} = 0.0025 \times 3,060,000 = 7,650
\]

Now, we need to adjust the **Allowance for Doubtful Accounts**. The current balance is a debit of $6,000, which means we need to adjust it to a credit balance. The entry required should be enough to cover both the existing debit and the new bad debt expense.

\[
\text{Required Adjustment} = 7,650 + 6,000 = 13,650
\]

Thus, the adjusting entry for uncollectible accounts is **$13,650**.

### **Part (b): Adjusted balances**

Now, let's find the adjusted balances.

- **Accounts Receivable:** The balance remains unchanged, so:

\[
\text{Accounts Receivable} = 680,000
\]

- **Allowance for Doubtful Accounts:** After the adjustment, it will have a credit balance of $7,650:

\[
\text{Allowance for Doubtful Accounts} = 7,650
\]

- **Bad Debt Expense:** The bad debt expense for the year is the amount we calculated in part (a):

\[
\text{Bad Debt Expense} = 7,650
\]

### **Part (c): Net realizable value of accounts receivable**

The net realizable value of accounts receivable is calculated as:

\[
\text{Net Realizable Value} = \text{Accounts Receivable} - \text{Allowance for Doubtful Accounts} = 680,000 - 7,650 = 672,350
\]

---

### **Summary of Answers:**
- **(a)** Adjusting entry for uncollectible accounts: $13,650
- **(b)** 
  - Accounts Receivable: $680,000
  - Allowance for Doubtful Accounts: $7,650
  - Bad Debt Expense: $7,650
- **(c)** Net realizable value of accounts receivable: $672,350

Would you like more details on any of these steps?

---

### **Related Questions:**
1. How do you calculate bad debt expense as a percentage of sales?
2. Why do companies estimate bad debt expense?
3. What impact does a debit balance in the allowance for doubtful accounts have?
4. How is the adjusting entry recorded in the general ledger?
5. What are the other methods to estimate uncollectible accounts?

**Tip:** Always check if the Allowance for Doubtful Accounts has a debit or credit balance before making adjustments.

At the end of the current year, Accounts Receivable has a balance of $680,000; Allowance for Doubtful Accounts has a debit balance of $6,000; and sales for the year total $3,060,000. Bad debt expense is estimated at 1/4 of 1% of sales.

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.
c. Determine the net realizable value of accounts receivable.

Learn how to calculate the adjusting entry for uncollectible accounts, determine adjusted balances, and calculate the net realizable value of accounts receivable. This problem includes key accounting concepts like allowance for doubtful accounts and bad debt expense, with a detailed solution for a business with $3,060,000 in sales.

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