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24 June, 18:44

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

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  1. 24 June, 19:09
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    The net realizable value of receivables that will be reported on the balance sheet at December 31, Year 1 $18,100.

    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.
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