Satin Corporation The data presented below is for Satin Corporation for the year ended December 31,2014.
Refer to the information for Satin Corporation.
If Satin uses the aging of accounts receivable approach to estimate its bad debts,what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Question

Satin Corporation The data presented below is for Satin Corporation for the year ended December 31,2014.
 Refer to the information for Satin Corporation.
If Satin uses the aging of accounts receivable approach to estimate its bad debts,what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense?

Quizplus · Accepted Answer

To calculate the net realizable value, we need to subtract the estimated amount of bad debts from the accounts receivable balance. Using the aging of accounts receivable approach, we can estimate the amount of bad debts as follows:

Age of Account | Amount | Percentage | Estimated Bad Debts 
0-30 days | $800,000 | 1% | $8,000 
31-60 days | $400,000 | 3% | $12,000 
61-90 days | $200,000 | 6% | $12,000 
Over 90 days | $100,000 | 15% | $15,000

Total estimated bad debts = $47,000

Therefore, the net realizable value of accounts receivable after the adjustment for bad debt expense would be:

Accounts receivable balance ($263,000) - Estimated bad debts ($47,000) = $216,000

Thus, the correct answer is (B) $219,000.

Satin Corporation the Data Presented Below Is for Satin Corporation