On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $74,600 and $3,700, respectively. During the year Kincaid reported $208,000 of credit sales. Kincaid wrote off $2,000 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $258,900. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:

Net accounts receivables in balance sheet $ 19,620

Explanation:

Computation of Net carrying value of receivables

Opening balance - Accounts Receivables $ 74,600

Add: Sales made on credit during year 2 $ 208,000

Less: Collections of receivables $ (258,900)

Less; Account receivables written off $ (2,000)

Account Receivables balance Year 2 $ 21,700

Allowance for doubtful accounts year 2

1 % of credit sales $ (2,080)

Net accounts receivables in balance sheet $ 19,620

The amounts written off are reduced from the accounts receivable accounts by debiting the allowance account.

Accounts Receivable = $ (74,600 + 208,000 - 2,000 - 258,900) = $ 21,700

Allowance for Dobtful Accounts = $ (3,700 - 2,000 + 208) = $ 1908

Net realizable value of receivables that Kincaid would report = $ (21,700 - 1908) = $ 19,792