Paxton's Aging Schedule of Its Accounts Receivable on December 31

question 5

Essay

Paxton's aging schedule of its accounts receivable on December 31 follows:
$\begin{array}{l|c|c}\text { Account Age } & \text { Balance } & \text { Non-collection Likelihood } \\\hline 1-30 \text { days } & \$ 100,000 & 3 \% \\31-90 \text { days } & 70,000 & 7 \% \\\text { Over } 90 \text { days } & 40,000 & 10 \%\end{array}$
The balance in Paxton's allowance for doubtful accounts immediately prior to December 31 adjusting entries is $700 credit. Determine bad debt expense and the net realizable value of the December 31 accounts receivable.

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Definitions:

Owner's Equity

The residual interest in the assets of a business after deducting its liabilities, representing the owner's claim on the company's resources.

Net Loss

The amount by which total expenses exceed total revenues in a given period, indicating a company is not profitable.

Drawings

Withdrawals made by the owner of a business from the company's earnings or assets for personal use.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.