Question

The following are a series of unrelated situations. 1. Halen Company’s unadjusted trial balance at December 31, 2017, included the following accounts.

	Debit \(	Credit \)
Accounts receivables	\(53,000
Allowance for doubtful accounts	4,000
Net sales		\)1,200,000

Halen Company estimates its bad debt expense to be 7% of gross accounts receivable. Determine its bad debt expense for 2017.

2. An analysis and aging of Stuart Corp. accounts receivable at December 31, 2017, disclosed the following.

Amounts estimated to be uncollectible	\(180,000
Accounts receivables	1,750,000
Allowance for doubtful accounts (per books)	125,000

What is the net realizable value of Stuart’s receivables at December 31, 2017?

3. Shore Co. provides for doubtful accounts based on 4% of gross accounts receivable, The following data are available for 2017.

Credit sales during 2017	\)4,400,000
Bad debt expenses	57,000
Allowance for doubtful accounts 1/1/17	17,000
Collection of accounts written off in prior years (Customer credit was re-established)	8,000
Customer accounts written off as uncollectible during 2017	30,000

What is the balance in Allowance for Doubtful Accounts at December 31, 2017?

4. At the end of its first year of operations, December 31, 2017, Darden Inc. reported the following information.

Accounts receivable, net of allowance for doubtful accounts	\(950,000
Customer accounts written off as uncollectible during 2017	24,000
Bad debt expense for 2017	84,000

What should be the balance in accounts receivable at December 31, 2017, before subtracting the allowance for doubtful accounts?

5. The following accounts were taken from Bullock Inc.’s trial balance at December 31, 2017.

	Debit	Credit
Net credit sales		\)750,000
Allowance for doubtful accounts	$14,000
Accounts receivables	310,000

If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported for 2017.

Instructions

Answer the questions relating to each of the five independent situations as requested.

Short answer

1	Total bad debt expenses	$7,710
2	Net realizable value	$1,570,000
3	Allowance for doubtful accounts	$171,000
4	Gross accounts receivables	$1,010,000
5	Bad debt expenses after adjustments	$23,300

Step-by-step solution

Definition of Bad Debt Expenses

Bad debt expenses can be defined as sacrifices that arise from the un-collectability of payments due from receivables.

Bad debt expenses

Particular	Amount $
Allowance for doubtful accounts	$4,000
Add: 7% of gross receivables	3,710
Total bad debt expenses	$7,710

Net realizable value

Particular	Amount $
Accounts receivables	$1,750,000
Less: Estimated uncollectible amount	(180,000)
Net realizable value	$1,570,000

Balance in allowance for doubtful accounts

Particular	Amount $
Opening balance	$17,000
Add: Re-established credit	8,000
Less: Customer accounts are written off as uncollectible	(30,000)
Add: Bad debt expenses @ 4% of $4,400,000	176,000
Allowance for doubtful accounts	$171,000

Balance in Accounts receivables

Particular	Amount $
Bad debt expenses 2017	$84,000
Less: Uncollectible 2017	(24,000)
	$60,000
Add: Net accounts receivables	950,000
Gross accounts receivables	$1,010,000

Bad debt expenses for the year 2017

Particular	Amount $
Bad debt expenses before adjustments @ 3% of $310,000	$9,300
Add: Allowance for doubtful accounts (debit balance)	14,000
Bad debt expenses after adjustments	$23,300