Question

Ceres Corporation conducts all sales on account and had net sales of $800,000 in 2020. On December 31, 2020, before adjusting entries, the balances in selected accounts were: accounts receivable $950,000 debit, and allowance for doubtful accounts $2,500 debit. The company estimates that 4% of its net sales will prove to be uncollectible. What is the net realizable value of the receivables reported on the financial statements at December 31, 2020?

Answer 1

Answer:

net receivables 920,000

Explanation:

as we determinate the bad debt as percentage of sales, this is the amount we must adjust the allowance for:

800,000 sales x 4% = 32,000 dollars of bad debt

allowance of doubtful accounts

DEBIT              CREDIT

2,000 beginning

                        32,000   adjustment

                        30,000   ending balance

account receivable:                     950,000

allowance for doubtful accounts (30,000)  

net receivables                             920,000