Chico Company began Year 2 with balances in accounts receivable and allowance for doubtful accounts of $44,300 and $1,675, respectively. The company reported credit sales of $490,250 during the year, and wrote off $1,400 of uncollectible accounts. Chico Company prepared the following aging schedule on December 31, Year 2:
Required:a) Prepare these general journal entries: (1) Credit sales (2) Collection of accounts receivable (3) Write-off of uncollectible accounts (4) Adjusting entry for uncollectible accountsb) Determine the net realizable value of accounts receivable.
What will be an ideal response?
a) 
b) $42,975
a) (2) Ending accounts receivable of $45,950 = Beginning accounts receivable of $44,300 + Credit sales of $490,250 ? Collections on account (the unknown) ? Write-offs of $1,400 Cash collections on account = $44,300 + $490,250 ? $1,400 ? $45,950 = $487,200
a) (4) Ending allowance for doubtful accounts balance = ($24,750 × 1%) + ($8,300 × 5%) + ($9,000 × 10%) + ($2,150 × 25%) + ($1,750 × 50%) = $2,975
Ending allowance for doubtful accounts of $2,975 = Beginning allowance for doubtful accounts of $1,675 + Uncollectible accounts expense (the unknown) ? Write-offs of $1,400
Uncollectible accounts expense = $2,975 ? $1,675 + $1,400 = $2,700
b) Net realizable value = Accounts receivable of $45,950 ? Allowance for doubtful accounts of $2,975 = $42,975
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