Let’s go step by step to solve this.

a. Determine the amount of the adjusting entry for uncollectible accounts.

You are given the following information:

• Balance of Allowance for Doubtful Accounts before adjustment: $32,600 (debit balance)
• Estimated Allowance for Doubtful Accounts after adjustment (using aging method): $225,000

The adjusting entry must bring the balance of Allowance for Doubtful Accounts from a debit balance of $32,600 to the desired balance of $225,000.

Since Allowance for Doubtful Accounts has a debit balance, you must credit the account to reach the correct balance.

$\text{Required Adjustment} = \text{Desired Balance} + \text{Current Debit Balance}$ $\text{Required Adjustment} = 225,000 + 32,600 = 257,600$

Thus, the amount of the adjusting entry is $257,600.

b. Determine the adjusted balances:

• Accounts Receivable remains unchanged, so its balance is still $5,125,000.

• Allowance for Doubtful Accounts will have an adjusted balance of $225,000, as calculated from the aging method.

• Bad Debt Expense is the amount of the adjusting entry, which is $257,600.

Adjusted balances:

1. Accounts Receivable: $5,125,000
2. Allowance for Doubtful Accounts: $225,000
3. Bad Debt Expense: $257,600

c. Determine the net realizable value (NRV) of accounts receivable.

The NRV of accounts receivable is calculated as:

$\text{NRV} = \text{Accounts Receivable} - \text{Allowance for Doubtful Accounts}$ $\text{NRV} = 5,125,000 - 225,000 = 4,900,000$

Thus, the net realizable value of accounts receivable is $4,900,000.

Summary:

• a. Adjusting entry amount: $257,600
• b. Adjusted balances:
  • Accounts Receivable: $5,125,000
  • Allowance for Doubtful Accounts: $225,000
  • Bad Debt Expense: $257,600
• c. Net realizable value of accounts receivable: $4,900,000

Do you want more details or have any questions?

Here are some related questions to expand your understanding:

1. How would the calculation change if sales were higher or lower?
2. What are some other methods for estimating uncollectible accounts?
3. How does the debit balance in Allowance for Doubtful Accounts affect the adjusting entry?
4. Why is it important to calculate the net realizable value of accounts receivable?
5. What impact does Bad Debt Expense have on financial statements?

Tip: Always keep track of whether the Allowance for Doubtful Accounts has a debit or credit balance before making adjustments, as this will affect your entry.