Ace Computing Company On January 1,2012,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 in 2012.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 2012 balance sheet will amount to:

Question

Quizplus · Accepted Answer

To determine the net realizable value of receivables, we need to subtract the allowance for doubtful accounts from the accounts receivable balance.

Beginning balance of Accounts Receivable = $40,000 
Add: Credit sales = $80,000 
Less: Receivables written off = $500 
Ending balance of Accounts Receivable = $40,000 + $80,000 - $500 = $119,500

Estimate of uncollectible accounts = 4% x $119,500 = $4,780

Therefore, the ending balance of Allowance for Doubtful Accounts will be $1,500 + $4,780 = $6,280

Net Realizable Value = Accounts Receivable - Allowance for Doubtful Accounts 
Net Realizable Value = $119,500 - $6,280 = $113,220

Thus, the best choice is B, $39,648.

Ace Computing Company on January 1,2012,the Accounts Receivable and the Allowance