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On December 31 of Swift Co's first year, $58,000 of accounts receivable is not yet collected. Swift estimates that $2,800 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 $500. Compute the realizable value of accounts receivable on January 1 after the write-off. Before Write-Off After Write-Off Realizable value of accounts receivable

On December 31 of Swift Co's first year, $58,000 of accounts receivable is not yet collected. Swift estimates that $2,800 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 $500. Compute the realizable value of accounts receivable on January 1 after the write-off. Before Write-Off After Write-Off Realizable value of accounts receivable

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Problem Description On December 31 of Swift Co.'s first year, $58,000 of accounts receivable is not yet collected. Swift estimates that $2,800 of its accounts receivable is uncollectible and records the year-end adjusting entry. #### Tasks 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 $500. Compute the realizable value of accounts receivable on January 1 after the write-off.** #### Solution Calculation Table | | Before Write-Off | After Write-Off | |------------------------------------|------------------|-----------------| | Realizable value of accounts receivable | | | ### Explanation The realizable value of accounts receivable is computed by subtracting the estimated uncollectible accounts from the total accounts receivable. Here are the steps: #### Step 1: Year-End Balance Sheet Value - **Total Accounts Receivable:** $58,000 - **Estimated Uncollectible Accounts:** $2,800 - **Realizable Value Before Write-Off:** \( \$58,000 - \$2,800 = \$55,200 \) #### Step 2: Post Write-Off Calculation - **Write-Off Amount:** $500 - **Effect on Realizable Value:** Writing off a specific account does not change the realizable value because the estimated uncollectible accounts should already account for these write-offs. Therefore, the realizable value remains the same as before the write-off, since it’s just an actualization of the uncollectible account. Following from the above explanation, the table is completed as: | | Before Write-Off | After Write-Off | |------------------------------------|------------------|-----------------| | Realizable value of accounts receivable | $55,200 | $55,200 | ### Summary - **December 31, Year End:** - Realizable Value = $55,200 - **January 1, After Write-Off:** - Realizable Value = $55,200
Transcribed Image Text:### Problem Description On December 31 of Swift Co.'s first year, $58,000 of accounts receivable is not yet collected. Swift estimates that $2,800 of its accounts receivable is uncollectible and records the year-end adjusting entry. #### Tasks 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 $500. Compute the realizable value of accounts receivable on January 1 after the write-off.** #### Solution Calculation Table | | Before Write-Off | After Write-Off | |------------------------------------|------------------|-----------------| | Realizable value of accounts receivable | | | ### Explanation The realizable value of accounts receivable is computed by subtracting the estimated uncollectible accounts from the total accounts receivable. Here are the steps: #### Step 1: Year-End Balance Sheet Value - **Total Accounts Receivable:** $58,000 - **Estimated Uncollectible Accounts:** $2,800 - **Realizable Value Before Write-Off:** \( \$58,000 - \$2,800 = \$55,200 \) #### Step 2: Post Write-Off Calculation - **Write-Off Amount:** $500 - **Effect on Realizable Value:** Writing off a specific account does not change the realizable value because the estimated uncollectible accounts should already account for these write-offs. Therefore, the realizable value remains the same as before the write-off, since it’s just an actualization of the uncollectible account. Following from the above explanation, the table is completed as: | | Before Write-Off | After Write-Off | |------------------------------------|------------------|-----------------| | Realizable value of accounts receivable | $55,200 | $55,200 | ### Summary - **December 31, Year End:** - Realizable Value = $55,200 - **January 1, After Write-Off:** - Realizable Value = $55,200
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