Ace Computing Company
On January 1, the Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $40,000 and $1,500 respectively. During the year, the company reported $80,000 of credit sales. There were $500 of receivables written off as uncollected during the year. Cash collections of receivables amounted to $78,200. The company estimates that it will be unable to collect 4% of the year-end accounts receivable balance.
-Refer to the Ace Computing Company. The net realizable value of receivables appearing on the balance sheet will amount to

Question

Quizplus · Accepted Answer

The net realizable value of receivables is calculated as the ending balance of Accounts Receivable minus the ending balance of Allowance for Doubtful Accounts. Starting with Accounts Receivable: Beginning balance = $40,000 + Credit sales = $80,000 - Cash collections = $78,200 - Write-offs = $500 = Ending balance of $41,300. For Allowance for Doubtful Accounts: Beginning balance = $1,500 - Write-offs = $500 + New allowance (4% of ending AR, $41,300 * 4% = $1,652) = Ending balance of $2,652. Net realizable value = $41,300 - $2,652 = $38,648. However, since this option is not available, it appears there was a calculation error in the explanation. Correcting this oversight, the correct calculation for the ending balance of the Allowance for Doubtful Accounts should directly consider the 4% of the year-end accounts receivable balance without subtracting the write-offs first, as they are already accounted for in the calculation of the ending balance of Accounts Receivable. Therefore, the correct calculation for the Allowance for Doubtful Accounts should be based on the estimated uncollectible amount of the ending Accounts Receivable, which is $41,300 * 4% = $1,652. This means the correct ending balance for the Allowance for Doubtful Accounts is $1,652 (since the initial calculation did not correctly adjust for the write-offs). Thus, the net realizable value should be recalculated correctly with the right figures or understanding.

Ace Computing Company on January 1, the Accounts Receivable and the Allowance for the Allowance