On January 1, 2014 the Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $30,000 and $500, respectively. During the year the company reported $75,000 of credit sales. There were $550 of receivables written-off as uncollectible in 2014. Cash collections of receivables amounted to $74,550. The company estimates that it will be unable to collect one percent (1%) of credit sales.
The net realizable value of receivables appearing on the December 31, 2014 balance sheet will amount to:
A) $29,200.
B) $30,450.
C) $29,750.
D) $24,300.

Question

Quizplus · Accepted Answer

The net realizable value of receivables is the amount of accounts receivable that the company expects to collect. This is calculated by taking the beginning balance of accounts receivable, adding the credit sales for the year, and then subtracting the amount of receivables written off as uncollectible and the estimated uncollectible amount.In this case, the beginning balance of accounts receivable is $30,000, the credit sales for the year are $75,000, the amount of receivables written off as uncollectible is $550, and the estimated uncollectible amount is $750 (1% of credit sales).Therefore, the net realizable value of receivables is $30,000 + $75,000 - $550 - $750 = $29,200.