Question

At the end of May, the unadjusted trial balance of Barker Industries included the following accounts:

Debit Credit
Sales (75% represent credit sales) $400,000
Accounts Receivable $240,000
Allowance For Doubtful Accounts 1,800
Barker Industries uses the percentage of sales approach in estimating uncollectible accounts. The uncollectible accounts expense is estimated to be 3% of credit sales The net realizable value of Barker's accounts receivable in the May 31 balance sheet is:_____.
a. $250,800.b. $229,200.c. $236,400.d. $226,200.

Answer 1

b. $229,200

Step-by-step explanation:

Computation for the net realizable value of Barker's accounts receivable in the May 31 balance sheet

First step is to find the credit sales

Credit sales=.75(400,000)

Credit sales=300,000

Second step is to find the 3% of 300,000

3% of 300,000=9,000

Third step is to add credit sales amount to Allowance For Doubtful Accounts

9,000 +1,800

=$10,800

Last step is to find the net realizable value

Net realizable value=Accounts Receivable $240,000-$10,800

Net realizable value=$229,200

Therefore the net realizable value of Barker's accounts receivable in the May 31 balance sheet is $229,200