Lithotech, Inc had net sales in 2016 of $700,000. At December 31, 2016, before a

Question

Lithotech, Inc had net sales in 2016 of $700,000. At December 31, 2016, before adjusting entries, the balances in selected accounts were: accounts receivable $125,000 debit, and allowance for doubtful accounts $1,200 debit. Lithotech estimates that 2% of its net sales will prove to be uncollectible. What is the cash realizable value of the receivables reported on the statement of financial position at December 31, 2016?

A) $109,800

B) $111,000

C) $112,200

D) $122,500

P/S: Answer appears to be B, but I believe it is C. Please help me

Explanation / Answer

Answer:- The cash realizable value of the receivables reported on the statement of financial position at December 31, 2016 is $111000 (option B).

Explanation:-Accounts receivable                                 $125000

Less:- Allowance for doubtful accounts                         $14000

Net Realizable value $111000

Where:-

Allowance for doubtful accounts= $700000*2%

                                                     =$14000

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