Question

The accounts receivable balance is $1,000,000. After adjustment, the allowance for doubtful account balance is $40,000. Net Sales were $12,000,000 and COGS was $8,000. What is the net realizable value of the receivables?

Answer 1

Answer:

The net realizable value from receivables is $960,000

Explanation:

Net realizable value of accounts receivable as the name indicates is the amount of cash that be reasonably realized from the balance of accounts receivable the company has.

The net realizable value is usually the value of accounts receivable less estimated allowance for doubtful account.

The net realizable value from the receivables is computed thus:

Accounts receivable balance            $1,000,000

Allowance for doubtful account          ($40,000)

net realizable value of receivables   $960,000

Answer 2

Answer:

$960,000

Explanation:

The net realizable value is the total cash that the company will expect to receive from their accounts receivable. The net realizable value (NRV) can be determined by:

NRV = total accounts receivable - allowance for doubtful accounts = $1,000,000 - $40,000 = $960,000