In the first year of operations, Ralph's Repair Service recognized $482,000 of service revenue earned on account. accounts receivable balance was $88,900. Ralph estimates that 2% of sales on account will not be collected. Duri wrote off a $200 receivable that was determined to be uncollectible. Assume there were no other transactions aff receivable. Required: a. What amount of cash was collected In Year 1? b. What amount of uncollectible accounts expense was recognized in Year 1? c. What will be Ralph's net realizable value of receivables on the December 31, Year 1 balance sheet?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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In the first year of operations, Ralph's Repair Service recognized $482,000 of service revenue earned on account. The ending accounts receivable balance was $88,900. Ralph estimates that 2% of sales on account will not be collected. During the year, Ralph wrote off a $200 receivable that was determined to be uncollectible. Assume there were no other transactions affecting accounts receivable.

**Required:**

a. What amount of cash was collected in Year 1?

b. What amount of uncollectible accounts expense was recognized in Year 1?

c. What will be Ralph's net realizable value of receivables on the December 31, Year 1 balance sheet?

| a. Cash collected                     |                     |
|---------------------------------|---------------------|
| b. Uncollectible accounts expense |                     |
| c. Net realizable value of receivables |                     |
Transcribed Image Text:In the first year of operations, Ralph's Repair Service recognized $482,000 of service revenue earned on account. The ending accounts receivable balance was $88,900. Ralph estimates that 2% of sales on account will not be collected. During the year, Ralph wrote off a $200 receivable that was determined to be uncollectible. Assume there were no other transactions affecting accounts receivable. **Required:** a. What amount of cash was collected in Year 1? b. What amount of uncollectible accounts expense was recognized in Year 1? c. What will be Ralph's net realizable value of receivables on the December 31, Year 1 balance sheet? | a. Cash collected | | |---------------------------------|---------------------| | b. Uncollectible accounts expense | | | c. Net realizable value of receivables | |
Expert Solution
Step 1: Introduction

Bad debts are often included as costs in a company's financial statements to represent the true impact of such non-collectible accounts on its financial health. Accounting for bad debts frequently entails assessing uncollectible amounts and making necessary changes, which may include creating a contra-asset account such as "Allowance for Doubtful Accounts" or immediately writing off individual accounts as bad debts. 

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