On January 1, 2016, Willett Company's account balances for Accounts Receivable and the related Allowance for Uncollectible Accounts were $3,600,000 and $90,000, respectively. During the year, sales revenue totaled $40 million, of which 70% were credit sales and the remainder were cash sales. Altogether, cash collections from all customers amounted to $30 million. Also, write-offs of accounts
deemed to be uncollectible totaled $250,000. At the end of the year, an analysis of aged accounts receivable indicated that 2% of total gross receivables may be uncollectible.
Required:
Determine the amount of bad debt expense for the year and net realizable value of receivables at the end of the year.
What will be an ideal response?
Answer: Summary of activity affecting the Accounts Receivable account:
Beginning balance (January 1) $3,600,000
Total sales 40,000,000
Total collections (30,000,000)
Write-offs (250,000)
Gross receivables (December 31) $13,350,000
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