The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2013, the allowance account had a credit balance of $82,500. Credit sales for 2013 totaled $3,100,000 and the year-end accounts receivable balance was $710,000. During this year, $80,000 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?

X Yes

No

2. What is the bad debt expense that Manda Panda should report in its 2013 income statement?
Bad debt expense
3.
Prepare the appropriate journal entry to record the contingency. (If no entry is required for an event, select "No journal entry required" in the first account field.)

Event General Journal Debit Credit
1 Bad debit expense
Allowance for uncollectible accounts
4.
What is the net realizable value (book value) Manda Panda should report in its 2013 balance sheet?

Accounts Receivable
End. Bal. 710,000
Allowance for Uncollectible Accounts
Beg. Bal 82,500
Write-off of bad debts Bad debt expense
End. Bal.
Balance Sheet:
Accounts Receivable
Allowance for uncllectible accounts
Net realizable Value