Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $160,000 of revenue on account during Year 1. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, Year 1 balance sheet would be:

A) $30,400.

B) $30,720.

C) $32,000.

D) $30,000.

Question

Business

Maddox Barber

28 June, 05:54

Hancock Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $160,000 of revenue on account during Year 1. During Year 1, Hancock collected $128,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 1% of revenue on account. The amount of net realizable value of receivables on the December 31, Year 1 balance sheet would be:

A) $30,400.

B) $30,720.

C) $32,000.

D) $30,000.

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Answers (1)

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Cordova · Answer 1

The realizable value of accounts receivable is $30,400 that is option A.

Explanation:

The net realizable value of the accounts receivable comprises of the initial revenue on accounts less the cash collected from accounts receivable less 1% allowance of uncollectible accounts as shown below:

Sales on accounts $160,000

cash collection from accounts receivable ($128,000)

less allowance for uncollectible accounts ($160,000*1%) ($1,600)

Net realizable value of accounts receivable $30,400