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A company had the following balances: Beginning April balance in allowance for bad debt: $6,000 (credit)...

A company had the following balances: Beginning April balance in allowance for bad debt: $6,000 (credit) Beginning April balance in accounts receivable: $200,000 During the month of April the company recorded the following: Bad debt expense is calculated as using the percent of credit sales method. The percent is 2%. The company recorded the entry for bad debt. Collection of cash related to accounts receivables of $120,000 Additional sales on account of $90,000 What is the company's net realizable value of its accounts receivable at the end of April?

Expert Solution

Answer)

Calculation of net realizable value of accounts receivable at the end of April

Net realizable value of accounts receivable at the end of April = Gross Accounts receivable at the end of April – Allowance for bad debts at the end of April

= $ 170,000 - $ 7,800

= $ 162,200

Therefore the net realizable value of accounts receivable at the end of April is $ 162,200

Working Note:

Calculation of Accounts receivable at the end of April

Accounts receivable at the end of April = Accounts receivable in the beginning of April + Sales during the month of April – Collection of cash from accounts receivable during the month of April

= $ 200,000 + $ 90,000 - $ 120,000

= $ 170,000

Calculation of Allowance for bad debts at the end of April

Allowance for bad debts at the end of April = Allowance for bad debts in the beginning of April + bad debts expense recognized during April

Allowance for bad debts at the end of April = Allowance for bad debts in the beginning of April + (Credit sales during April X percentage of bad debts)

= $ 6,000 + ($ 90,000 X 2%)

= $ 7,800

ekkarill92 answered 1 year ago

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