Question

Kramer Company uses the aging method of accounts receivable method and determined that $5,000 of the company’s Accounts Receivable are estimated to be uncollectible. At the end of the year, the balance of Accounts Receivable is $100,000 and the unadjusted DEBIT balance of the Allowance for Doubtful Accounts is $500. Credit sales during the year totaled $150,000. What is Net Receivables at the end of the year?

a) $95,500

b) $155,000

c) $94,500

d) None of the above

e) $95,000

Answer 1

Estimated uncollectible at the end of the year = $5,000

Unadjusted debit balance of allowance for doubtful accounts = $500

Credit sales = $150,000

Accounts receivable, ending = $100,000

Net realizable value of accounts receivable at the end of the year = Accounts receivable, ending - Estimated uncollectible at the end of the year

= 100,000 - 5000

= $95,000

Correct option is (e)

Since ending balance of estimated uncollectible is already given, hence unadjusted debit balance of allowance for doubtful accounts is not needed to find out Net realizable value of accounts receivable .