Chapter 1 Problem 5-21
170,000 – 10,000 258,000 – 20,000
Rate in 2007 = ------------------------ = .016 Rate in 2008 = -------------------------- = .017
10,000,000 14,000,000
1. Retained earnings (.016 x 1,250,000) 20,000
Allowance for doubtful accounts 20,000
2. Allowance – January 1 20,000
Recoveries – 2008 10,000
Doubtful accounts – 2008 (squeeze) 92,000
Total 122,000
Less: Writeoff – 2008 88,000
Allowance – December 31 (.017 x 2,000,000) 34,000
3. Accounts receivable 2,000,000
Less: Allowance for doubtful accounts 34,000
Net realizable value 1,966,000
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