Question

On December 31 of Swift Co.’s first year, $70,000 of accounts receivable is not yet collected. Swift estimates that $4,000 of its accounts receivable is uncollectible and records the year-end adjusting entry. (1) Compute the realizable value of accounts receivable reported on Swift’s year-end balance sheet. (2) On January 1 of Swift’s second year, it writes off a customer’s account for $700. Compute the realizable value of accounts receivable on January 1 after the write-off.

Answer 1

Answer:

1. $66,000

2. $66,000

Explanation:

The computations are shown below:

1. Before written off:

= Account receivable balance - uncollectible amount

= $70,000 - $4,000

= $66,000

2. After written off:

= Account receivable balance - second year written off amount - uncollectible amount + second year written off amount

= $70,000 - $700 - $4,000 + $700

= $66,000

Answer 2

Net Realizable Value for receivable accounts is calculated as the total balance received less the doubtful account allowance, which is the amount of invoice dollars the company estimates that is in bad credit.

What is Net Realizable Value of receivable accounts?

NRV, is the amount of money a company expects to receive based on final sales or disposal of an item after deducting any related costs.

$\rm\,Receivable\,value\,of\,accounts\,receivable = Full\,receivable\,balance - \,allowance\,for\,doubtful\,accounts$

As per the information given,

$(1)\rm\, Before\,write\,off:\\\\\\rm\,NRV= \ \,70,000 - \ 4,000\\\\NRV = 66,000\\\\(2)\rm\, After\,write\,off:\\\\NRV = Account\,receivable\,balance - second\,year\,written\,off\,amount - uncollectible\,amount + second\,year\,written\,off\,amount\\\\= \ 70,000 - \ 700 - \ 4,000 + \ 700\\\\= \ 66,000$

Hence, in case 1 and 2, Net realizable value before writing off and after writing off stands at $66,000.

To learn more about Net realizable value, refer to the link:

https://brainly.com/question/25760494