Question

Hancock Medical Supply Co., earned $160,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company did not write-off any uncollectible accounts. It estimates that it will be unable to collect 1% of revenue on account. What is the net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1?

Answer 1

The net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1 is $30,400

Step-by-step explanation:

The company estimates that it will be unable to collect 1% of revenue on account.

Estimated uncollectible = 1% x $160,000 = $1,600

The entry to record bab debts expense:

Debit bab debts expense $1,600

Credit Allowance for doubtful accounts $1,600

Hancock Medical Supply Co., earned $160,000 of revenue on account and collected $128,000 of cash from its receivables accounts.

The balance of Accounts receivable at Accounts receivable (balance) = $160,000 - $128,000 = $32,000

Net realizable value of receivablese = Accounts receivable (balance)- Allowance for doubtful accounts (balance) = $32,000 - $1,600 = $30,400