On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $74,600 and $3,700, respectively. During the year Kincaid reported $208,000 of credit sales. Kincaid wrote off $2,000 of receivables as uncollectible in Year 2. Cash collections of receivables amounted to $258,900. Kincaid estimates that it will be unable to collect one percent (1%) of credit sales. The net realizable value of receivables appearing on Kincaid's Year 2 balance sheet will amount to:

Explanation:

Accounts Receivable = $ (74,600+ 208,000 - 2,000 - 258,900) = $ 21,700

Allowance for Dobtful Accounts = $ ( 3,700 - 2,000 + 208) = $ 1908

Net realizable value of receivables that Kincaid would report = $ ( 21,700- 1908) = $ 19,792

Net accounts receivables in balance sheet                       $    19,620  

Explanation:

Computation of Net carrying value of receivables

Opening balance - Accounts Receivables                        $   74,600

Add: Sales made on credit during year 2                          $ 208,000

Less: Collections of receivables                                         $ ( 258,900)

Less; Account receivables written off                                $ (    2,000)

Account Receivables balance Year 2                                $     21,700

Allowance for doubtful accounts year 2

1 % of credit sales                                                               $ (    2,080)

Net accounts receivables in balance sheet                       $    19,620

The amounts written off are reduced from the accounts receivable accounts by debiting the allowance account.

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