Answer:
The net realizable value of Miller's receivables at the end of Year 2 was $27,910
Explanation:
Let's start with the definition of each concept:
<u>Sales on account:</u> These represent sales which are not paid right away.
<u>Account receivable: </u>This is an account which represent the sales on account which currently are still unpaid.
When a sale is payed at the very moment it ocours, it is done using the cash account and the sales accounts.
<u>Allowance for doubful account: </u> This account is a counter-assets account that decrease the net value of account receivable. It represent the account that will not be collected.
<u>The method to determinate the allowance will be the following:</u>
Sales on account x estimate uncollectiblle = Bad debt expense
$103,000 x 3% of sales = 3090 bad debt expense
<em>The journal entry to record this will be:</em>
bad debt expense debit 3090
allowance for doubful account credit 3090
The company collected 72,000 of the sales on account during the year so the balance will be:
103,000 - 72,000 = 31,000 account receivable
So resuming the account receivable account have this movements:
account receivable debit for 103,000
sales revenue credit for 103,000
to show the sales on account
and then
cash debit for 72,000
account receivable credit for 72,000
to show the collections of the customer accounts
Now subtracting the espected bad debt we get the Miller's net realizable value at the end of Year 2:
31,000 - 3,090 = 27,910
Account receivable 31,000
Allowance for doubful accounts (3,090)
net 27,910
Have a nice evening !
