The following events occur for The Underwood Corporation during 2015 and 2016, i
ID: 2445617 • Letter: T
Question
The following events occur for The Underwood Corporation during 2015 and 2016, its first two years of operations.
June 12, 2015 Provide services to customers on account for $39,800.
September 17, 2015 Receive $24,000 from customers on account.
December 31, 2015 Estimate that 45% of accounts receivable at the end of the year will not be received.
March 4, 2016 Provide services to customers on account for $54,800.
May 20, 2016 Receive $10,000 from customers for services provided in 2015.
July 2, 2016 Write off the remaining amounts owed from services provided in 2015.
October 19, 2016 Receive $44,000 from customers for services provided in 2016.
December 31, 2016 Estimate that 45% of accounts receivable at the end of the year will not be received.
Calculate the net realizable value of accounts receivable at the end of 2015 and 2016.
Calculate the net realizable value of accounts receivable at the end of 2015 and 2016.
Explanation / Answer
Account Recievable at the end of 2015 = Beginning A/R + Service on Account - Amount recieved
Account Recievable at the end of 2015 = 0 + 39800 - 24000
Account Recievable at the end of 2015 = 15800
Allowances for doubtful debt = 45%*15800 = 7110
Net realizable value of accounts receivable at the end of 2015 = 15800-7110
Net realizable value of accounts receivable at the end of 2015 = $ 8690
Account Recievable at the end of 2016 = Beginning A/R + Service on Account - Amount recieved - Amount w/off
Account Recievable at the end of 2016 = 15800 + 54800 - (10000+44000) - (15800-10000)
Account Recievable at the end of 2016 = $ 10800
Allowances for doubtful debt needed at the end = 45%*10800 = 4860
Net realizable value of accounts receivable at the end of 2016 = 10800-4860
Net realizable value of accounts receivable at the end of 2016 = $ 5940
Answer
Net realizable value of accounts receivable at the end of 2015 = $ 8690
Net realizable value of accounts receivable at the end of 2016 = $ 5940
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