Teeming Company uses the allowance method of accounting for bad debts.The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year.
The following additional information is available for the current year:

-See Teeming Company information above.If Teeming determines bad debt expense using 1.5 percent of net credit sales,the net realizable value of accounts receivable on the December 31 balance sheet will be

Question

Teeming Company uses the allowance method of accounting for bad debts.The following summary schedule was prepared from an aging of accounts receivable outstanding on December 31 of the current year.
  The following additional information is available for the current year:
 
-See Teeming Company information above.If Teeming determines bad debt expense using 1.5 percent of net credit sales,the net realizable value of accounts receivable on the December 31 balance sheet will be

Quizplus · Accepted Answer

First, we need to calculate the estimated bad debt expense for the year using the given information. 
Net credit sales = $750,000 + $900,000 = $1,650,000 
Estimated bad debt expense = 1.5% x $1,650,000 = $24,750

Next, we need to adjust the allowance for doubtful accounts balance to reflect the estimated bad debt expense. 
Beginning balance of allowance for doubtful accounts = $10,500 
Add: estimated bad debt expense = $24,750 
Ending balance of allowance for doubtful accounts = $35,250

Finally, we can calculate the net realizable value of accounts receivable by subtracting the allowance for doubtful accounts balance from the accounts receivable balance. 
Accounts receivable balance = $750,000 
Less: ending balance of allowance for doubtful accounts = $35,250 
Net realizable value of accounts receivable = $714,750

Therefore, the net realizable value of accounts receivable on the December 31 balance sheet will be $744,750 (answer choice C).

Teeming Company Uses the Allowance Method of Accounting for Bad