Question

Cho Company has sales of $900,000, of which 25% are cash sales and the remainder is on credit. As of year-end, but before the bad debts adjustment, the Allowance for Doubtful Accounts has a credit balance of $300, and Accounts Receivable has a debit balance of $60,000. If bad debts are estimated to be 1.5% of credit sales, determine the company’s Net Realizable Value of Accounts Receivable at the end of the year.

Group of answer choices

$49,875

$50,175

$46,200

$49,575

Answer 1

Credit sales = sales*75%

$900,000*75%

=$675,000

Allowance for doubtful account estimated = Credit sales*1.5%

=$675,000*1.5%

=$10,125

Net realizable value = accounts receivable -Allowance for doubtful Account

Partial Balance sheet
Accounts receivable	$60,000
Allowance for doubtful account	($10,125)
Ne realizable value		$49,875

=$60,000-$10,125

=$49,875

Answer A)

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