Sage Inc. experienced the following transactions for 2018, its first year of ope

Question

Sage Inc. experienced the following transactions for 2018, its first year of operations: 1. Issued common stock for $50,000 cash. 2. Purchased $140,000 of merchandise on account. 3. Sold merchandise that cost $110,000 for $250,000 on account. 4. Collected $236,000 cash from accounts receivable. 5. Paid $118,000 on accounts payable. 6. Paid $50,000 of salaries expense for the year. 7. Paid other operating expenses of $28,000. 8. Sage adjusted the accounts using the following information from an accounts receivable aging schedule: Allowance Balance Number of Days | Past Due Current 0-30 31-60 61-90 Over 90 days Amount $10,000 2,000 1,200 500 Percent Likely to Be Uncollectible 0.01 0.05 0.10 0.20 0.50 300 F. What is the net realizable value of the accounts receivable at December 31, 2018? Net realizable value

Explanation / Answer

Calculate allowance for doubtful accounts :

Account receivable = 250000-236000 = 14000

Allowance for doubtful accounts = 570

Net realizable value = 14000-570 = 13430

Amount Uncollectible percent Uncollectible amount Current 10000 0.01 100 0-30 2000 0.05 100 31-60 1200 0.10 120 61-90 500 0.20 100 Over 90 days 300 0.50 150 Total 570

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