Hancock Medical Supply Co., earned $160,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $128,000 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?

Question

Jonathan Henderson

Business

19 March, 13:23

Hancock Medical Supply Co., earned $160,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $128,000 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?

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Natasha Palmer · Answer 1

The net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1 is $30,400

Explanation:

The company estimates that it will be unable to collect 1% of revenue on account.

Estimated uncollectible = 1% x $160,000 = $1,600

The entry to record bab debts expense:

Debit bab debts expense $1,600

Credit Allowance for doubtful accounts $1,600

Hancock Medical Supply Co., earned $160,000 of revenue on account and collected $128,000 of cash from its receivables accounts.

The balance of Accounts receivable at Accounts receivable (balance) = $160,000 - $128,000 = $32,000

Net realizable value of receivablese = Accounts receivable (balance) - Allowance for doubtful accounts (balance) = $32,000 - $1,600 = $30,400