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On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

-What is the net realizable value of receivables that will be reported on Kincaid's Year 2 balance sheet?
A)$29,075
B)$27,725
C)$28,950
D)$28,400

Question

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On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $31,000 and $500, respectively. During Year 2, Kincaid reported $72,500 of credit sales, wrote off $550 of receivables as uncollectible, and collected cash from receivables amounting to $74,550. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales.

-What is the net realizable value of receivables that will be reported on Kincaid's Year 2 balance sheet?
A)$29,075
B)$27,725
C)$28,950
D)$28,400

Quizplus · Accepted Answer

Ending accounts receivable = Beginning accounts receivable of $31,000 + Credit sales of $72,500 - Collections on account of $74,550 - Write-offs of $550 = $28,400
Ending allowance for doubtful accounts = Beginning allowance for doubtful accounts of $500 + Uncollectible accounts expense of $725 - Write-offs of $550 = $675
Net realizable value = Accounts receivable of $28,400 - Allowance for doubtful accounts of $675 = $27,725

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