Question - At the beginning of 2010, EZ Tech Company's accounts receivable balance was $140,000 and the balance in Allowance for Doubtful Accounts was $2,350 (Cr.). EZ Tech's sales in 2010 were $1,050,000, 80% of which were on credit. Collections on account during the year were $670,000. The company wrote off $4,000 of uncollectible accounts during the year.
Required -
1. Prepare summary journal entries related to the sale, collections, and write-offs of accounts receivable during 2010.
2. Prepare journal entries to recognize bad debts assuming that (a) bad debts expense is 3% of credit sales and (b) amounts expected to be uncollectible are 6% of the yearend accounts receivable.
3. What is the net realizable value of accounts receivable on December 31, 2010, under each assumption in (2)?