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un-collectible accounts expense of £8,000, accounts receivable of £140,000, and allowance for uncollectible accounts of £12,000. The net realizable value of Hawk's accounts receivable is:
a. £128,000
b. £132,000
c. £136,000
d. £120,000
My Answer Is Option " C " .
agreed to all >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>..
According to US GAAP the net realizable value of accounts receivable account will be140,000 -4,000 =136,000 . Answer C .
After subtract un-collectible expense from the allowance .
Assalam-o-Alikum!
According to my understanding, the NRV for Receivables is option A i.e128,000. Because the NRV is a B/S term and B/S shows the allowance figure only. The bad debts (uncollectible receivables) can occur only after the allowance is provided against receivables. Now how i calculated it is as follows:
Allowance for un-collectible receivables:
Dr. Allowance for un-collectible receivables 12,000 (I/S expense)
Cr. Allowance for un-collectible receivables 12,000 (B/S allowance)
Un-collectible receivables (Bad debts):
Dr. Allowance for un-collectible receivables 8,000 (B/S allowance)
(Because the expense has already been charged to I/S when you created the allowance)
Cr. receivable accounts 8,000 (B/S)
Net realisable value (NRV): (Clubbing the above entries)
Accounts receivables 132,000 [140,000(Total receivables) -8,000 (un-collectible)]
Less: Allowance (4,000) [12,000 (Total allowance) -8,000 (un-collectible)]
NRV 128,000
Hello Everyone, Thanks for answering the question, but unfortunately, no one has given the correct answer, almost all of them have said its 'C'. Please justify how it is option C. Thanks.
Its Option C, i.e136,000.......
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> c. £136,000
120000 is the net realisable value of receivables after deducting the provision and bad debts
The net realizable value of Hawk's account should be £136,000
First of all we need to understand the term "NRV A/R".
It refers Net balance reported in balance sheet. That is a simple calculation of Accounts receivable minus "contra asset account" allowance for uncollectible.
In this case, Option A will be right answer. ( -0) =
