Germo Company started business at the beginning of the current year. The entity established an allowance for doubtful accounts estimated at 5% of credit sales. During the year, the entity wrote off P50,000 of uncollectible accounts. Further analysis showed that the merchandise purchased amounted to P9,000,000 and ending merchandise inventory was P1,500,000. Goods were sold at 40% above cost. The total sales comprised 80% sales on account and 20% cash sales. Total collections from customers, excluding cash sales, amounted to P6,000,000. What is the net realizable value of accounts receivable at year-end?
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.
Germo Company started business at the beginning of the current year. The entity established an allowance for doubtful accounts estimated at 5% of credit sales. During the year, the entity wrote off P50,000 of uncollectible accounts.
Further analysis showed that the merchandise purchased amounted to P9,000,000 and ending merchandise inventory was P1,500,000. Goods were sold at 40% above cost. The total sales comprised 80% sales on account and 20% cash sales. Total collections from customers, excluding cash sales, amounted to P6,000,000.
What is the net realizable value of
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