Answer:
(1) Computation of the realizable value of accounts receivable reported on Swift’s year-end balance sheet.
Accounts receivable $54,000 - Allowance for doubtful accounts $2,400 = $51,600
(2) On January 1 of Swift’s second year, the net realizable value of the accounts receivable remains the same.
Explanation:
Net realizable value of accounts receivable is the amount that is realizable after deducting the allowance for doubtful accounts.
In scenario (1), $2,400 was estimated as uncollectible. Therefore, the following adjusting entries apply:
Debit Bad debt expense $2,400
Credit Allowance for doubtful accounts $2,400
(To record bad debt expense)
The net realizable of the accounts receivable is therefore: $54,000 - $2,4000 - $51,600
In scenario (2), the write-off of $500 only impacts the allowance for doubtful accounts and the accounts receivable, that is:
Debit Allowance for doubtful accounts $500
Credit Accounts receivable $500
(To write-off accounts receivable)
With the second adjusting entries, the net realizable value of accounts receivable remains the same.
