At the beginning of 2017, Miyazaki Company's Accounts Receivable balance was $105,000, and the balance in Allowance for Doubtful Accounts was $1,950. Miyazaki's sales in 2017 were $787,500, 80% of which were on credit. Collections on account during the year were $502,500. The company wrote off $3,000 of uncollectible accounts during the year. Required
a. Identify and analyze the transactions related to the sales, collections, and write-offs of accounts receivable during 2017.
b. Identify and analyze the adjustments 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.
c. What is the net realizable value of accounts receivable on December 31, 2017, under each assumption in part (2)?
d. What effect does the recognition of bad debts expense have on the net realizable value? What effect does the write-off of accounts have on the net realizable value?