Question

Hancock Medical Supply Co., earned $82,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $65,400 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

NRV of accounts receivable is $15,780

Step-by-step explanation:

The net realizable value of the accounts receivable is the likely amount of cash that could be received from accounts receivable out of the total amount owed by them,the computation of NRV of accounts receivable is done below:

Revenue on account $82,000

cash collected from accounts receivable ($65,400)

Balance of accounts receivable $16,600

1% of uncollectible accounts($82000*1%) ($820)

Balance of accounts receivable $15,780

It is likely that the amount recoverable from accounts receivable of $16,600 is $15,780

Answer 2

$15,780

Step-by-step explanation:

Ending accounts receivable = Beginning accounts receivable + Revenue on account – Amount collected = 0 + $82,000 - $65,400 = $16,600

Ending allowance balance = Beginning allowance balance + Uncollectible accounts expense = 0 + ($82,000 × 1%) = $820

Net realizable value of receivables = $16,600 - $820 = $15,780