Hailey Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $80,000 of revenue on account during 2013. During 2013, Hailey collected $64,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, 2013 balance sheet would be:

Question

Quizplus · Accepted Answer

$0 beginning accounts receivable + $80,000 revenue on account - $64,000 collected = $16,000 ending accounts receivable; $0 beginning allowance balance + ($80,000 x 1%) uncollectible accounts expense = $800 ending allowance balance; net realizable value of receivables = $16,000 - $800 = $15,200