On January 1, Year 2, Burton Company had a balance in Accounts Receivable of $90,000 and a balance in the Allowance for Doubtful Accounts account of $2,400. Burton had credit sales of $244,000 during Year 2 and ended the year with a balance in Accounts Receivable of $48,000. Burton also wrote off $1,100 of receivables during Year 2. Burton uses the allowance method and assumes that 2% of the sales on account will not be collected.Required:a) After adjustments at the end of Year 2, what will be the balance in the Allowance for Doubtful Accounts?b) What was the decrease in the net realizable value of accounts receivable in Year 2 as a result of the write-off of the receivable?c) What amount of cash was collected from customers during Year 2?

Question

What will be an ideal response?

Answer 1

a) $6,180
b) $0
c) $284,900
a) Ending allowance for doubtful accounts = Beginning allowance for doubtful accounts of $2,400 + Uncollectible accounts expense of ($244,000 × 2%) - Write-off of $1,100 = $6,180
b) Net realizable value = Accounts receivable - Allowance for doubtful accounts 
Write-offs do not affect net realizable value because they decrease both accounts receivable and the allowance for doubtful accounts by the same amount. 
c)