Hancock Medical Supply Company, earned $160,000 of revenue on account during Year 1, its first year of operation. During Year 1, Hancock collected $128,000 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 the amount of revenue that the company expects to collect from its customers. In this case, the company estimates that it will be unable to collect 1% of revenue on account. Therefore, the net realizable value of receivables is $160,000 - (1% x $160,000) = $158,400.

Hancock Medical Supply Company, Earned $160,000 of Revenue on Account