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:

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