Exercise 5-9 Record the adjustment for uncollectible accounts and calculate net realizable value (LO3)
[The following information applies to the questions displayed below.]
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Southwest
Pediatrics has the following balances on December 31, 2015, before any
adjustment: Accounts Receivable = $121,000; Allowance for Uncollectible
Accounts = $2,100 (debit). On December 31, 2015, Southwest estimates uncollectible accounts to be 20% of accounts receivable.
| Required: |
| 1. |
Record the adjustment for uncollectible accounts on December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation:
1.
Bad debt expense: ($121,000 × 20%) + $2,100 = $26,300
| 2. |
Determine
the amount at which bad debt expense is reported in the income
statement and the allowance for uncollectible accounts is reported in
the balance sheet.
Explanation:
2. Allowance for uncollectible accounts:
| $24,200 = $26,300 credit adjustment – $2,100 debit balance before adjustment |
| 3. |
Calculate the net realizable value of accounts receivable.
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