What is the ending balance of the allowance for doubtful


Michael's Bike Shop sells new and used bicycle parts. Although a majority of its sales are cash sales, it makes a significant amount of credit sales. During 2013, its first year of operations, Michael's Bike Shop experienced the following:

Sales on account ..................$275,000

Cash sales ...................$620,000

Collections of accounts receivable ...........$240,000

Uncollectible accounts charged off during the year ..$400

Required: 

a. Assume that Michael's Bike Shop uses the allowance method of accounting for uncollectible accounts and estimates that 1 percent of its sales on account will not be collected. Answer the following questions:

(1) What is the Accounts Receivable balance at December 31, 2013? 

(2) What is the ending balance of the Allowance for Doubtful Accounts at December 31, 2013, after all entries and adjusting entries are posted? 

(3) What is the amount of uncollectible accounts expense for 2013? 

(4) What is the net realizable value of accounts receivable at December 31, 2013? 

b. Assume that Michael's Bike Shop uses the direct write off method of accounting for uncollectible accounts. Answer the following questions:

(1) What is the Accounts Receivable balance at December 31, 2013? 

(2) What is the amount of uncollectible accounts expense for 2013? 

(3) What is the net realizable value of accounts receivable at December 31, 2013? 

Solution Preview :

Prepared by a verified Expert
Accounting Basics: What is the ending balance of the allowance for doubtful
Reference No:- TGS01237966

Now Priced at $15 (50% Discount)

Recommended (94%)

Rated (4.6/5)