22. Lithotech, Inc had net sales in year 20x4 of $700,000. At December 31, of ye

Question

22. Lithotech, Inc had net sales in year 20x4 of $700,000. At December 31, of year 20x4, before adjusting entries, the balances in selected accounts were: accounts receivable $125,000 debit, and allowance for doubtful accounts $1,200 credit. 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, of 20x4? A. 109,800 B. 112,200 C. 122,500 D. 111,000 22. Lithotech, Inc had net sales in year 20x4 of $700,000. At December 31, of year 20x4, before adjusting entries, the balances in selected accounts were: accounts receivable $125,000 debit, and allowance for doubtful accounts $1,200 credit. 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, of 20x4? A. 109,800 B. 112,200 C. 122,500 D. 111,000

Explanation / Answer

Given: Net Sales = $700,000

2% of net sales are uncollectable = 0.02*700000 = $14,000

allowances for doubtful accounts = $1,200 credit

accounts receivable on 31st December = $125,000

Therefore cash realizable value of the receivable = $125,000 - $14,000 + $1,200 = $112,200

Thus the answer is (B) $112,200

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