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6 March, 18:54

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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  1. 6 March, 20:18
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    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
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