Sunland Company uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance) $570,000 (debit) Allowance for doubtful accounts (unadjusted) 5,500 (debit) The company estimates that 2% of accounts receivable will become uncollectible. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (b) What is the ending (adjusted) balance in Allowance for Doubtful Accounts? Ending (adjusted) balance in Allowance for Doubtful Accounts $ (c) What is the cash (net) realizable value?

1. The Journal entry is shown below:-

2. $11,400

3. $558,600

Explanation:

The Journal Entry is shown below:-

Bad debt expense = (Accounts receivable ending balance × Percentage estimated as uncollectible) + Existing debit balance in allowance for doubtful accounts

= $570,000 × 2% + 5,500

= $11,400 + 5,500

= $16,900

Bad debt expense Dr,                                $16,900  

        To Allowance for doubtful accounts        $16,900

(Being bad debt expense is recorded)

2. The ending balance in Allowance for doubtful accounts = Accounts receivable ending balance × Percentage estimated as uncollectible

= 570,000 × 2%

= $11,400

3. Cash net realized value = Account receivable - The ending balance in Allowance for doubtful accounts

= $570,000 - $11,400

= $558,600

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