Williams Company uses the net credit sales method to estimate bad debt expense and has estimated that 6% of its credit sales will be uncollectible. During 2027, Williams Company reported net credit sales of $350,000 and collected a total of $426,000 cash from its credit customers. Also during 2027, Williams Co. wrote-off $12,000 of accounts receivable as being uncollectible and had recoveries of previously written off accounts receivable totaling $19,000 (note that the $19,000 recovery is not included in the $426,000 of cash collections given previously). Williams Company reported accounts receivable of $202,000 and had an allowance for doubtful accounts with a $27,000 credit balance at January 1, 2027. Calculate the net realizable value of Williams Company's accounts receivable at December 31, 2027
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.
Williams Company uses the net credit sales method to estimate
bad debt expense and has estimated that 6% of its credit sales
will be uncollectible. During 2027, Williams Company reported
net credit sales of $350,000 and collected a total of $426,000
cash from its credit customers. Also during 2027, Williams Co.
wrote-off $12,000 of
and had recoveries of previously written off accounts receivable
totaling $19,000 (note that the $19,000 recovery is not included
in the $426,000 of cash collections given previously). Williams
Company reported accounts receivable of $202,000 and had an
allowance for doubtful accounts with a $27,000 credit balance
at January 1, 2027.
Calculate the net realizable value of Williams Company's accounts
receivable at December 31, 2027.
Net realizable value is a value computed by deducting allowance for doubtful accounts from the Gross Accounts receivable.
It helps users of the financial statements understand the realizable value of their receivables.
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