Question

On January 1, Year 5, customers owed Eagle $40,000. On December 31, Year 5, customers owed Eagle $30,000. Eagle uses the direct write‐off method for bad debts. No bad debts were recorded in Year 5. Under the cash basis of accounting, what amount of net revenue should Eagle report for Year 5?

Answer 1

$200,000

Step-by-step explanation:

The computation of the net revenue is shown below:

= Cash sales gross - Returns and allowances + credit sales gross - discounts + beginning balance of account receivable - ending balance of account receivable

= $80,000 - $4,000 + $120,000 - $6,000 + $40,000 - $30,000

= $200,000

We simply first compute the net cash sales after considering the returns and allowances, and net credit sales after considering the discounts, and deduct the ending balance of account receivable