Question

Jake Company records bad debt expense using the net credit sales method and has
estimated that 5.5% of its credit sales will prove to be uncollectible. During
2019, Jake Company reported net credit sales of $120,000 and collected $150,000
cash from its credit customers. The $150,000 includes a $6,000 recovery of an
account receivable written off in the previous year. During 2019, Jake Company
wrote-off as uncollectible accounts receivable of $4,000. Jake Company reported
accounts receivable at January 1, 2019 of $88,000 and the allowance for doubtful
accounts had an $8,000 credit balance at January 1, 2019.

Calculate the net realizable value of Jake Company's accounts receivable at
December 31, 2019.

Answer 1

Allowance for doubtful account at Jan 1, 2019	$        8,000
Add: Uncollectible during the year ($120,000*5.5%)	$        6,600
Less: Written off during th year	$      (4,000)
Allowance for doubtful account at Dec 31, 2019	$      10,600
Accounts receivable at Jan 1, 2019	$      88,000
Add: Credit sales during the year	$   120,000
Less: Cash collected during the year ($150,000-$6,000)	$ (144,000)
Accounts receivable at Dec 31, 2019	$      64,000
Accounts receivable at Dec 31, 2019	$      64,000
Less: Allowance for doubtful account at Dec 31, 2009	$   (10,600)
Net realizable value as at 31 Dec 2019	$      53,400