The manda panda company uses the allowance method to account for bad debts. at the beginning of 2018, the allowance account had a credit balance of $92,400. credit sales for 2018 totaled $3,190,000 and the year-end accounts receivable balance was $507,500. during this year, $88,500 in receivables were determined to be uncollectible. manda panda anticipates that 3% of all credit sales will ultimately become uncollectible. the fiscal year ends on december 31. required: 1. does this situation describe a loss contingency? 2. what is the bad debt expense that manda panda should report in its 2018 income statement? 3. prepare the appropriate journal entry to record the contingency. 4. complete the table below to calculate the net realizable value manda panda should report in its 2018 balance sheet?

1. Does this situation describe a loss contingency?

Yes, the situation reflect the necessity of report a loss contingency because the it's needed to cover the 3% of Allowance for Uncollectible Accounts

2. What is the bad debt expense that Manda Panda should report in its 2018 income statement? $11.325

3. Prepare the appropriate journal entry to record the contingency.

Please see explanation section.

4. Complete the table below to calculate the net realizable value Manda Panda should report in its 2018 balance sheet?

Explanation:

The entry to reflect the bad expenses of the contingency:

Bad debt expense $ 11.325  

Allowance for Uncollectible Accounts   $ 11.325

Net Realizable Value is:

Accounts Receivable $ 507.500  

Allowance for Uncollectible Accounts  $ 15.225

Net Realizable Value  $ 492.275  

Initial Balance    

Accounts Receivable  $ 507.500  End 2018

Allowance for Uncollectible Accounts  - $ 92.400Beginning 2018

Entry when $88,500 in receivables were determined to be uncollectible.  

Allowance for Uncollectible Accounts  $ 88.500  

Accounts Receivable  $ 88.500

(Keep in mind that the balance of Acc Rec is at the end of 2018, so this entry had already been registered.)

New Balance    

Accounts Receivable  $ 507.500  End 2018

Allowance for Uncollectible Accounts  $ 3.900End 2018

Bad debt expense  $ 11.325  to complete the 3%

Allowance for Uncollectible Accounts  $ 11.325  

New Balance    

Accounts Receivable  $ 507.500  

Allowance for Uncollectible Accounts  $ 15.2253%

Net Realizable Value  $ 492.275