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Financial Accounting

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Use the following information to answer multiple-choice questions 5 and 6. At the end of the year, before any adjustments are made, the accounting records for Sutton Company show a balance of $100,000 in accounts receivable. The allowance for uncollectible accounts has a remaining balance of $2,000. (This means last year’s estimate was too large by $2,000.) The company uses accounts receivable to estimate bad debts expense. An analysis of accounts receivable results in an estimate of $27,000 of uncollectible accounts.
5. The bad debts expense on the income statement for the year would be
a. $27,000.
b. $25,000.
c. $23,000.
d. $29,000.
6. Net realizable value of the receivables on the year-end balance sheet would be
a. $100,000.
b. $75,000.
c. $73,000.
d. $77,000.

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