Delta Company sold goods to wholesalers on terms 2/15, n/30. The entity had no cash sales but 50% of the customers took advantage of the discount. The entity used the gross method of recording sales and accounts receivable. An analysis of the trade accounts receivable at year-end revealed the following: Age (No. of Days) Amount Collectible 0-15 2,000,000 100% 16-30 1,400,000 95% 31-60 400,000 90% Over 60 200,000 50% What is the net realizable value of accounts receivable at year-end?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Delta Company sold goods to wholesalers on terms 2/15, n/30. The entity had no cash sales but 50% of the customers took advantage of the discount. The entity used the gross method of recording sales and accounts receivable.
An analysis of the trade accounts receivable at year-end revealed the following:
|
Age (No. of Days) |
Amount |
Collectible |
|
0-15 |
2,000,000 |
100% |
|
16-30 |
1,400,000 |
95% |
|
31-60 |
400,000 |
90% |
|
Over 60 |
200,000 |
50% |
What is the net realizable value of accounts receivable at year-end?
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