Final answer:
The initial Accounts Receivable balance at Highland Company was adjusted for earned revenues, collections, and write-offs, resulting in an ending balance. This calculation is necessary for preparing accurate financial statements and understanding the company's financial position.
Step-by-step explanation:
Understanding Accounts Receivable Changes
The Accounts Receivable balance for Highland Company at December 31, 2015, was $523,000. During 2016, Highland earned revenue of $458,000 on account and collected $321,000 on account. Additionally, Highland wrote off $12,000 of uncollectible accounts. To accurately report these changes, one must assess the impact on the company's financial statements.
At the beginning of 2016, Highland's Accounts Receivable was $523,000. Over the year, it added $458,000 to the receivables due to earned revenues. However, cash collections on these accounts amounted to $321,000, which reduced the Accounts Receivable balance. Furthermore, Highland faced some uncollectibles, leading to a write-off amounting to $12,000. This also reduces the Accounts Receivable balance.
To calculate the ending balance of Accounts Receivable for 2016, the following calculation can be performed: Starting balance $523,000 + Earned on account $458,000 - Collected $321,000 - Write-offs $12,000 = $648,000 as the ending Accounts Receivable balance. This calculation showcases the business mechanics of managing receivables and highlights the significance of monitoring these figures for financial health