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jlove4159 · Mar 3, 2007, 10:58 PM

I have the following question and I can not seem to find an example and would just like some help.

On December 31, of the current year, a campanies unadjusted trial balance reveled the following: Accounts Receivable $185,600; Sales Revenue $1,280,000; (75% were on credit), Allowance for Doubtful Accounts of $1,600 (credit balance).

Problem
Assume that this companies bad debts are estimated and recorded as 1.5% of credit sales.

1. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance shee after adjustment.

I can do the math and everything, I'm just not sure about how it will affect Accts Rec and how much I need to debit Allowance for D.A.

Any help is greatly appreciated.

Thanks,
jlove4159

jlove4159 · Mar 3, 2007, 11:06 PM

Would it read as follows?

Current Assets
Accounts Receivable $185,600
Allowance for Doubtful Accounts $12,800 $172,800

Since the Allowance for D.A. already had a credit of $1,600?

CaptainForest · Mar 4, 2007, 12:15 AM

How did you get 172,800?

Sales = 1,280,000 x .75 = 960,000
Bad Debt Expense = 960,000 x 0.015 = 14,400

AR 185,600
AFDA = 14,400 + 1,600 = 16,000

jlove4159 · Mar 4, 2007, 07:05 AM

Wouldn't I only put 12,800 in the AFDA since I already have 1,600, they would both add up to the 14,400 that I need. Also, doesn't the 12,800 have to come from somewhere? That's how I got 172,800, by taking the 12,800 needed for AFDA from Accounts Receivable.

CaptainForest · Mar 4, 2007, 02:22 PM

Yes, I am sorry, I didn't read the question.

It would only be an addition of 12,800.

As for what the Balance Sheet will look like:
Accounts Receivable 185,600
Less: AFDA 14,400
Net AR 171,200