Question

Wilson Corporation uses an income statement approach to estimate credit losses. Its gross Accounts Receivable of $5,000,000 at the beginning of the period had a net realizable value of $4,925,000. During the period, the company wrote off actual accounts receivable of $100,000 and collected $7,835,000 from credit customers. Credit sales for the year amounted to $9,000,000. Of its credit sales, 1 percent was estimated to eventually be uncollectible. Determine the net realizable value of the company’s accounts receivable at the end of the period

Answer 1

Answer:

ending receivables:  6,000,000

Explanation:

credit sales: 9,000,000

1% allowance:   90,000

net Accounts receivable

beginning     4,925,000

net sales       9,000,000

collection     (7,835,000)

allowance        (90,000)  

year-end:     6,000,000

When teh company does a write-off the net receivables doesn't change

as both, account receivable (assets) and allowance (contra-assets) for 100,000 Therefore the net receivables is not affected by this.