Hancock Medical Supply Company, earned $86,500 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $68,600 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?

Question

Quizplus · Accepted Answer

The net realizable value of receivables is calculated as the ending accounts receivable minus the estimated uncollectible accounts. Ending accounts receivable is $86,500 (revenue on account) - $68,600 (cash collected) = $17,900. Estimated uncollectible accounts are 1% of $86,500, which is $865. Therefore, the net realizable value is $17,900 - $865 = $17,035.

Hancock Medical Supply Company, Earned $86,500 of Revenue on Account