Calistoga Produce estimates bad debt expense at 0.20% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $486,000 and $1,510, respectively, at December 31, 2020. During 2021, Calistoga's credit sales and collections were $331,000 and $309,000, respectively, and $1,770 in accounts receivable were written off. Calistoga's accounts receivable at December 31, 2021, are:

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ladeitan ladeitan · Answer 1 · 2020-04-27T02:47:55+02:00

Answer:

Calistoga's accounts receivable at December 31, 2021, is $506,230.

Explanation:

First, let's analyze the transactions that occurred during the year in journals, as follows:

Debit Accounts receivable $331,000

Credit Sales revenue $331,000

(To record credit sales during the year)

Debit Cash $309,000

Credit Accounts receivable $309,000

(To record collection on account during the year)

Debit Allowance for doubtful account $1,770

Credit Accounts receivable $1,770

(To record write-off of accounts receivable during the year)

The net effect of the transactions above on Accounts receivable will be: $486,000 + $331,000 - $309,000 - $1,770 = $506,230

Adjusting entries to bad debt expense is: $1,510 - $1,770 = $260 (debit) + 0.20% of $331,000 = $922

Debit Bad debt expense $922

Credit Allowance for doubtful accounts $922

(To record bad debt expense during the year)

Balance in allowance for uncollectible accounts is 0.20% of $331,000 = $662.

Net cash realizabe of accounts receivable is $506,230 - $662 = $505,568