Question

Hancock Medical Supply Co., earned $90,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $71,000 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? Multiple Choice $18,290 $18,100 $19,000 $18,810

Answer 1

The net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1 $18,100.

Step-by-step explanation:

There was no information on whether the company has any opening balance in Accounts receivable and Allowance for doubtful accounts.

Hancock Medical Supply Co., earned $90,000 sales revenue on account. The collections of $71,000 on account would reduce the credit sales to $19,000 ($90,000 - $71,000).

Since the company estimates that it will be unable to collect 1% of revenue on account, this means 1% of $90,000 = $900.

So, net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1 is $19,000 - $900 = $18,100.