Prior to the Year-End Adjustment to Record Bad Debt Expense

question 62

Essay

Prior to the year-end adjustment to record bad debt expense for 2014 the general ledger of Stickler Company included the following accounts and balances: Cash collections on accounts receivable during 2014 amounted to $450,000. Sales revenue during 2014 amounted to $800,000, of which 75% was on credit, and it was estimated that 2% of these credit sales made in 2014 would ultimately become uncollectible.
Required:
A. Calculate the bad debt expense for 2014.
B. Determine the adjusted 2014 year-end balance of the allowance for doubtful accounts.
C. Determine the net realizable value of accounts receivable for the December 31, 2014 balance sheet.

---

Definitions:

Union

An organized association of workers formed to protect and further their rights and interests; or, in mathematics, the set containing all the distinct elements of some given sets.

Dependent Events

Events where the outcome or occurrence of the first affects the outcome or occurrence of the second.

Independent Events

Two or more events where the occurrence of one event does not affect the probability of the other(s).

Mutually Exclusive

Two events that cannot occur at the same time, meaning the occurrence of one event prevents the occurrence of the other.