Question

Leach Inc. experienced the following events for the first two years of its operations: Year 1: 1. Issued $11,000 of common stock for cash. 2. Provided $79,100 of services on account. 3. Provided $37,000 of services and received cash. 4. Collected $70,000 cash from accounts receivable. 5. Paid $39,000 of salaries expense for the year. 6. Adjusted the accounting records to reflect uncollectible accounts expense for the year. Leach estimates that 6 percent of the ending accounts receivable balance will be uncollectible. 7. Closed the revenue account. 8. Closed the expense account. Year 2: 1. Wrote off an uncollectible account for $700. 2. Provided $89,000 of services on account. 3. Provided $33,000 of services and collected cash. 4. Collected $82,000 cash from accounts receivable. 5. Paid $66,000 of salaries expense for the year. 6. Adjusted the accounts to reflect uncollectible accounts expense for the year. Leach estimates that 6 percent of the ending accounts receivable balance will be uncollectible. Exercise 7-7A Part c c. What is the net realizable value of the accounts receivable at December 31, Year 1? Net realizable value

Answer 1

c) Calculate net realizable value at December 31, Year 1

Current assets
Account receivable	9100
Less: Allowance for doubtful accounts	-546
Net realizable value		8554