For Each of the Following Scenarios, Indicate the Amount of the Adjusting

question 131

Essay

For each of the following scenarios, indicate the amount of the adjusting journal entry for bad debt expense to be recorded, the balance in Allowance for Doubtful Accounts after adjustment at December 31, and the net realizable value of accounts receivable at December 31.
(a) Based on an analysis of Simmon's Company's $380,000 balance in Accounts Receivable at December 31, it was estimated that $15,500 will be uncollectible. There is a credit balance of $1,200 in Allowance for Doubtful Accounts before adjustment.
(b) Blake Company had credit sales of $900,000 at year-end, and has an Accounts Receivable balance of $425,000 at December 31, and an Allowance for Doubtful Accounts credit balance of $11,000 before adjustment. Blake estimates bad debt expense as 3/4 of 1% of credit sales.
(c) Hidgon Inc. has a balance of $812,000 in Accounts Receivable at December 31. An analysis of those receivables shows $24,000 will probably not be collected. Before adjusting entries are prepared, the Allowance for Doubtful Accounts has a debit balance of $750.

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Definitions:

Petroleum Production

The process of extracting crude oil from the earth and refining it into usable petroleum products.

Medical Care

The diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans through professional services.

Constant-cost Industry

An industry where input prices do not change as industry output changes, resulting in a horizontal supply curve.

LRMC

Long-Run Marginal Cost, which is the additional cost of producing one more unit of output when all inputs, including capital, are variable.