During the first year of operation, 2018, Direct Service Co. recognized $290,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $46,000. For this first year in business, the owner believes uncollectible accounts expense will be about 1 percent of sales on account. Required What amount of cash did Direct Service collect from accounts receivable during 2018? Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for 2018? What is the net realizable value of receivables at the end of 2018?

Question

Business

Adolfo Cunningham

7 September, 14:58

During the first year of operation, 2018, Direct Service Co. recognized $290,000 of service revenue on account. At the end of 2018, the accounts receivable balance was $46,000. For this first year in business, the owner believes uncollectible accounts expense will be about 1 percent of sales on account. Required What amount of cash did Direct Service collect from accounts receivable during 2018? Assuming Direct Service uses the allowance method to account for uncollectible accounts, what amount should Direct Service record as uncollectible accounts expense for 2018? What is the net realizable value of receivables at the end of 2018?

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Answers (1)

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Isaac Gaines · Answer 1

1. $244,000

2. $2,900

3. $43,100

Explanation:

1. The computation of cash amount received during a particular year is shown below:

= Opening balance of accounts receivable + Service revenue - ending balance of accounts receivable

= $0 + $290,000 - $46,000

= $244,000

2. The computation of the uncollectible accounts expense is shown below:

= Service revenue * percentage

= $290,00 * 1%

= $2,900

3. The computation of the net realizable value of receivable is shown below:

= Ending balance of accounts receivable - uncollectible accounts expense

= $46,000 - $2,900

= $43,100