At the end of the current year, accounts receivable has a balance of $550,000; allowance for doubtful accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. an analysis of receivables estimates uncollectible receivables as $25,000.

determine:

a) the amount of the adjusting entry for bad debt expense

b) the adjusted balances of accounts receivable, allowance of doubtful accounts, and bad debt expense.

c) the net realizable value of accounts receivable.

Bad debt expense$ 19,500  

Allowance for Uncollectible Accounts  $ 19,500

Final Balance  

Accounts Receivable$ 550,000Debit

Allowance for Uncollectible Accounts    $ 25,000Credit

Bad debt expense  $ 19,500Debit

Net Accounts Receivable$ 525,000Debit

Explanation:

It's necessary to entry the next journal entry to adjust the the Allowance for Uncollectible Accounts.

Bad debt expense$ 19,500  

Allowance for Uncollectible Accounts  $ 19,500

Accounts Uncollectible are those credit that the company give and there are not chances of been collected.

When the customers buy products on credits but then the company can't collect the debt, then it's necessary  to write off the unpaid bill as uncollectible

One way it's to write-off directly the bad debts at the moment decided that the credit are uncollectible, the total amount  it's reported as bad debt expenses which affect negativly the income statement and the accounts receivable are reduced in the same amount, less assets.

The other way it's to determine a percentage of total amount of accounts receivables as uncollectible, exist many ways to analize the accounts receivable and figure the value of uncollectible.

When the company has the percentage of uncollectible accounts the journal entry required is Bad Expenses (debit) with Allowance for Uncollectible Accounts (credit)

At the moment of the write-off, as the expenses were just recognized we only use the Allowance for Uncollectible Accounts (Debit) with Accounts Receivable (Credit), with this we are recognizing the uncollectible credit of the company.

due to the changes the federal reserve is making the unused reserves will impact the economy by them facing inflation. inflation is definfed as the increase in pricing of a good or service but the decline of the value of money used for purchasing those items. when the economy has a high inflation rate, they are subject to money loss and hurt on the economy.