Willis Company had $200,000 in credit sales for Year 1,and it estimated that 2% of the credit sales would not be collected.The balance in Accounts Receivable at the end of the year was $38,000.Willis had never used the allowance method to account for its receivables until Year 1.The net realizable value of its accounts receivable at the end of the year was $34,000.

Question

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Uncollectible accounts expense (increase to allowance for doubtful accounts)= $200,000 × 2% = $4,000
Net realizable value = Accounts receivable of $38,000 -Allowance for doubtful accounts of $4,000 = $34,000

Willis Company Had $200,000 in Credit Sales for Year 1,and