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24 September, 05:32

The Miller Company earned $133,000 of revenue on account during Year 2. There was no beginning balance in the accounts receivable and allowance accounts. During Year 2, Miller collected $87,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. The net realizable value of Miller's receivables at the end of Year 2 was:

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  1. 24 September, 08:53
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    The net realizable value of Miller's receivables at the end of Year 2 was: $42,010

    Explanation:

    Open a Trade Receivable Account as follows:

    Debits:

    Revenue $133,000

    Totals $133,000

    Credits:

    Cash $87,000

    Balance $46,000

    Totals $133,000

    Note that Allowance for Doubtful debts is estimated at 3% of the Company's Sales on Account

    Allowance for Doubtful debts = $133,000 * 3%

    = $ 3, 990

    Net realizable value of Miller's receivables

    Trade Receivable Balance $46,000

    Less Allowance for Doubtful Debts $3,990

    Trade Receivables $42,010
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