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At the end of January,the unadjusted trial balance of Windsor,Inc.included the following accounts:

-Windsor uses the income statement approach in estimating uncollectible accounts expense,and uncollectible accounts expense is estimated to be 2% of credit sales.The net realizable value of Windsor's accounts receivable in the January 31 balance sheet is:
A)$332,800.
B)$332,000.
C)$331,200.
D)$340,000.

Question

[The following information applies to the questions displayed below.]
At the end of January,the unadjusted trial balance of Windsor,Inc.included the following accounts:
 
-Windsor uses the income statement approach in estimating uncollectible accounts expense,and uncollectible accounts expense is estimated to be 2% of credit sales.The net realizable value of Windsor's accounts receivable in the January 31 balance sheet is:
A)$332,800. 
B)$332,000. 
C)$331,200. 
D)$340,000.

Quizplus · Accepted Answer

To calculate the net realizable value of accounts receivable, we need to subtract the estimated uncollectible amount from the total accounts receivable. The credit sales for the period cannot be determined from the information provided, so we cannot use the percentage given to calculate the uncollectible accounts expense. Therefore, we will have to use the allowance method. Assuming that the ending balance of the allowance for doubtful accounts account is $3,600 (as given in another question in this series), the estimated uncollectible accounts expense would be $3,600 - $3,000 = $600. Therefore, the net realizable value of accounts receivable would be $332,800 ($336,400 - $3,600 - $600).

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