Larsen Company began the current year with balances in accounts receivable and allowance for doubtful accounts of $45,700 and $1,280, respectively. The company reported credit sales of $475,250 during the year, collected $480,200, and wrote off $800 of uncollectible accounts. Larsen Company estimates that 12% of its accounts receivable balance will be uncollectible.Required:a) Determine the balance in the allowance for doubtful accounts as of the end of the current year.b) Compute Larsen Company's uncollectible accounts expense for the current year.c) Determine Larsen's net realizable value of accounts receivable as of the end of the current year.
What will be an ideal response?
a) $4,794
b) $4,314
c) $35,156
a) Ending allowance for doubtful accounts = Accounts receivable of $39,950 × 12% = $4,794
b) Ending unadjusted allowance for doubtful accounts = Beginning credit balance in allowance for doubtful accounts of $1,280 ? Write-offs of $800 = $480
Uncollectible accounts expense = Ending adjusted allowance for doubtful accounts of $4,794 (from part a) ? Ending unadjusted allowance for doubtful accounts of $480 = $4,314
c) Ending accounts receivable = Beginning accounts receivable of $45,700 + credit sales of $475,250 ? Collections on account of $480,200 ? write-off of $800 = $39,950
Net realizable value = Accounts receivable of $39,950 (from part a) ? Allowance for doubtful accounts of $4,794 = $35,156
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