If the income statement method of estimating uncollectible accounts expense is followed, and uncollectible accounts expense is estimated to be 2% of net credit sales, the net realizable value of Four Star accounts receivable at the end of the month is:

Question

Quizplus · Accepted Answer

To calculate net realizable value, we need to subtract the estimated uncollectible accounts expense (based on income statement method) from the accounts receivable balance.

Net credit sales = $1,250,000
Uncollectible accounts expense = 2% x $1,250,000 = $25,000

Accounts receivable balance = $870,050
Net realizable value = $870,050 - $25,000 = $845,050

Therefore, the answer is B.

If the Income Statement Method of Estimating Uncollectible Accounts Expense