Allowance Method for Accounting for Bad Debts

At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $167,000, and the balance in Allowance for Doubtful Accounts was $2,850. EZ Tech's sales in 2017 were $1,250,000, 80% of which were on credit. Collections on account during the year were $800,000. The company wrote off $5,000 of uncollectible accounts during the year.

1. Identify and analyze the adjustments to recognize bad debts assuming that amounts expected to be uncollectible are 5% of the year-end accounts receivable.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

-

Expenses

=

Income

Allowance for Doubtful Accounts

?

No Entry

0

?

No Entry

0

Bad Debts Expense

?

?

2. What is the net realizable value of accounts receivable on December 31, 2017, under each assumption in part (2):

a. Using the percentage of sales approach, the net realizable value of the receivables is?

b. Using the percentage of year-end receivables approach, the net realizable value of the receivables is? $fill in the blank e0b89aff104b06f_2