Question 1 (1 point) At the beginning of the year, XYZ had $250,000 in Accounts

Question

Question 1 (1 point) At the beginning of the year, XYZ had $250,000 in Accounts Receivable and $45,000 in Allowance for Doubtful Accounts. During the year XYZ sold $1,500,000 of product on account and collected $1,350,000 in cash. In addition, a customer declared bankruptcy so XYZ wrote-off $30,000 of outstanding Accounts Receivable. Question 1: Determine the ending balance in Accounts Receivable and Allowance for Doubtful Accounts before any adjusting entry or provision for bad debt expense is recorded

Explanation / Answer

Q1) Determine ending balance of Account receivable and allowance for doubtful accounts

Ending balance of account receivable = 250000+1500000-1350000-30000 = 370000

Ending balance of allowance for doubtful accounts = 45000-30000 = 15000

Q2) Adjusting entry :

3) Calculate net realizable value :

Net realizable value = 370000-52000 = 318000

Date accounts & explanation debit credit Bad debt expense (370000*10%) 37000    Allowance for doubtful accounts 37000 (To record adjusting entry)

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