Question

Each member of a team is to participate in estimating uncollectibles using the aging schedule and percents shown in Problem 7-3A. The division of labor is up to the team. Your goal is to accurately complete this task as soon as possible. After estimating uncollectibles, check your estimate with the instructor. If the estimate is correct, the team then should prepare the adjusting entry and the presentation of accounts receivable (net) for the December 31, 2017, balance sheet.

Short answer

Answer

Bad debt expenses of the business entity total $27,150, and the net realizable value of accounts receivables is $3,572,850.

Step-by-step solution

Step-By-Step SolutionStep 1: Definition of Bad Debts

Bad Debts are treated as an expense of the business entity, and it is the amount that will not collect from the customers.

Aging schedule

Particular	Accounts receivables	Expected percentage of uncollectible	Estimated uncollectible
Not yet due	$830,000	1.25%	$10,375
1 to 30 days past due	254,000	2.00	5,080
31 to 60 days past due	86,000	6.50	5,590
61 to 90 days past due	38,000	32.75	12,445
Over 90 days past due	12,000	68	8,160
			$41,650

Adjusting entry and presentation of accounts receivables

Date	Accounts and Explanation	Debit $	Credit $
31 Dec	Bad debt expenses	$27,150
	Allowance for bad debts		$27,150

Balance sheet presentation:

Particular	Amount $
Accounts receivables	$3,600,000
Less: Allowance for bad debts	(27,150)
Net realizable value	$3,572,850