On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried...
On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $70,400 and $2,800, respectively. During the year Kincaid reported $187,000 of credit sales. Kincaid wrote off $1,700 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $222,300. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:
a)35,100
b)31,530
c)30430
d)33400
Homework Answers
Correct Option is (c) $30,430
Provided opening accounts receivables = $70,400
Add: Current year credit sales = $187,000
Less: Bad Debts written off = ($1,700)
Less: Amounts Received = ($222,300)
Closing Balance = $33,400
Provided 1% of credit sales is bad debts = $187,000 X 1%
= $1,870
Opening doubtful debts account = $2,800
Less: Set off of current year bad debts = ($1,700)
Add: Current year allowance = $1,870
Closing balance = $2,970
Net Realizable value of Accounts receivable at end of
Year 2 = Accounts Receivables – Allowance for Doubtful Debts
Account = $33,400 - $2,970 = $30,430
Therefore, correct option is (c) $30,430
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