Question

The Miller Company earned $123,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $82,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. What is the net realizable value of Miller's receivables at the end of Year 1

Answer 1

$37,310

Step-by-step explanation:

The computation of the net realizable value is shown below:

= Earned revenue - cash collected amount - estimated value

where,

Earned revenue is $123,000

Cash collection is $82,000

And, the estimated value is

= $123,000 × 3%

= $3,690

So, placing these values to the above formula the net realizable value is

= $123,000 - $82,000 - $3,690

= $37,310