Question

Valiant Company reported the following analysis of current receivables at year-end:

Trade accounts receivable	2,000,000
Allowance for doubtful accounts	(100,000)
Claim against shipper for goods lost in transit in November	300,000
Selling price of unsold goods sent by valiant on consignment at 150% of cost and not included in ending inventory	600,000
Security deposit on lease of warehouse	200,000
Total	3,000,000

What total amount should be reported as current trade and other receivables?

Answer 1

A receivable is classified as current if it is expected to be collected within the lower of 1 year or the operating cycle.  Hence,, the claim against the shipper may be considered as a current receivable but the lease deposit is non-current. The unsold consigned goods are in the possession of the consignee but are the property of the consignor hence the unsold consigned goods should be included in inventory at cost, not in receivables at their sales price.

Accordingly, current net receivables should equal $2,200,000 [($2,000,000 – $100,000) net trade receivables + $300,000 claim].