Question

Assume uncollectible accounts receivable are estimated at 5% of a $100,000 ending balance of accounts receivable and the allowance for uncollectible accounts receivable before any year-end adjustment amounted to a $1,500 debit balance. Given this information, determine the net realizable value of accounts receivable that should be reflected on the balance sheet at the end of the year.

Answer 1

To determine the net realizable value of accounts receivable, subtract the estimated uncollectible accounts and the allowance for uncollectible accounts from the ending balance of accounts receivable.

Step-by-step explanation:

To determine the net realizable value of accounts receivable, we need to calculate the amount of uncollectible accounts and subtract it from the ending balance of accounts receivable. In this case, the uncollectible accounts are estimated to be 5% of the $100,000 ending balance, which is $5,000. The allowance for uncollectible accounts before any adjustment is $1,500 debit balance. To find the net realizable value, we subtract the estimated uncollectible accounts and the allowance for uncollectible accounts from the ending balance of accounts receivable.

Net Realizable Value = Ending Balance of Accounts Receivable - Estimated Uncollectible Accounts - Allowance for Uncollectible Accounts

Net Realizable Value = $100,000 - $5,000 - $1,500 = $93,500

The net realizable value of accounts receivable that should be reflected on the balance sheet at the end of the year is $93,500.