The following information is available for Quality Book Sales's sales on account and accounts receivable:

Accounts Receivable Balance, January 1, Year 2 $ 78,500

Allowance for Doubtful Accounts, January 1, Year 2 4,710

Sales on Account, Year 2 550,000

Collections of Accounts Receivable, Year 2 556,000

After several collection attempts, Quality Book Sales wrote off $2,850 of accounts that could not be collected. Quality Book Sales estimates that 0.5 percent of sales on account will be uncollectible.

Required

Compute the following amounts:

(1) Using the allowance method, the amount of uncollectible accounts expense for Year 2.

(2) Net realizable value of receivables at the end of Year 2.

1) Amount of uncollectible accounts expenses is $ 2,750

2) Net realizable value of receivables at the end of Year 2 is $65,040

Explanation:

Accounts Receivable Balance, January 1, Year 2 = $ 78,500

Allowance for Doubtful Accounts, January 1, Year 2 = $4,710

Sales on Account, Year 2 = $550,000

Collections of Accounts Receivable, Year 2 = $556,000

1) Amount of uncollectible accounts expenses = $550,000 * 0.5% = $ 2,750

2) Allowance for doubtful accounts, beginning balance = $4,710

Less: Write off = $ - 2,850

Add: Uncollectible accounts expense for the year = $2,750

Allowance for doubtful accounts, ending balance = $4,610

Accounts receivable, Beginning balance = $78,500

Add: Credit sales = $550,000

Less: Collections = $-556,000

Less: Write off = $-2,850

Accounts receivable, Ending balance = $69,650

Accounts receivable, Ending balance = $69,650

Less: Allowance for doubtful accounts, ending balance = $-4,610

Net realizable value = $65,040